Fidelity Says Not So Fast' To Independent Chair Push
February 23, 2004
The head of the world's No. 1 mutual fund company said last Tuesday that forcing firms to hire independent chairmen might not be the end-all solution to fixing problems in the industry.
In an op-ed article published in The Wall Street Journal, Fidelity Investments CEO Edward C. Johnson III cited academic papers that claim outsiders are not always best-suited to head up a company.
"The government's argument that independents are the silver bullet to prevent abuses just isn't supported by the facts," Johnson penned, adding that if a person has his or her own money invested in the company, as Johnson does himself, the commitment to helping that company succeed may be greater than it would be for an independent person.
Regulators have suggested that independent chairmen may be the answer to the late-trading and market-timing problems that have slammed the industry, problems that Fidelity itself has not yet been associated with.
"If this rule is adopted," Johnson wrote, "the immediate result will be to reduce the expertise and hands-on feel' of mutual fund board chairs across the industry, whose long experience equips them to detect subtle nuances in fund operations."
He added that every company is different, writing, "If an independent chairperson is right for one company, fine. If at another company, based on the judgment of an independent board, an interested chairman is elected, then that, too, should be fine."
Fund Managers Bullish But Cautious, Merrill Finds
While they expect recovery in earnings and the overall economy to continue, global fund managers have slowly shifted toward more defensive strategies, according to survey results released last week by Merrill Lynch.
Sixty-four percent of the 299 fund managers that filled out the February survey believe corporate profits will increase over the next 12 months, but that represents a 7% decrease from last month.
Consecutive months of weaker U.S. payroll numbers and commodity prices are seen as the reason for the slight downturn in expectations, according to Merrill. While 33% of the fund managers said they weighed portfolios toward basic materials in January, only 15% said the same in February. While most of the managers thought the stock market was now at its mid-level phase, a hefty 22% thought it to already be in its late cycle.
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