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Week in Review

June 28, 2012 1 comment

Et tu, mutual funds?  Smart Money writes about the sorry state of most mutual fund boards of directors. Some stats:  15% of mutual fund directors have served for more than 20 years; the average pay is $260,000 for attending between four and 8 meetings per year; and one enterprising director oversees 170 funds and pulls in $1 million per year. “Being on a mutual fund board is the most comfortable position in corporate America,” says Arthur Levitt, a former SEC chairman.

Shareholder value:  Not!  In a new book, Cornell Professor Lynn Stout argues that shareholder value is the wrong metric on which to focus in order to create long term profits.  Dealbook outlines her argument that “as companies have increasingly focused on their stock prices and given managers more shareholdings, they have inadvertently empowered hedge funds that push for short-term solutions.” On the other side of the debate:  Milton Friedman and Nell Minow.

Investors say nay on exec pay.  Deal Journal notes that a record 80% of votes cast by shareholders of Chesapeake Energy were against the pay package slated for CEO Aubrey McClendon. With 55% of votes cast going against Citi chief Vikram Pandit’s comp, this is a trend to watch.

Star-studded hedge funds don’t aim for the sequel.  Institutional Investor writes that as a generation of extremely successful hedge fund managers near retirement age, few appear to be ready to effectively hand over the Bloomberg terminal and take the steps needed for their firms to endure.  “Many managers are not taking the succession process seriously enough or are not willing to face up to what it entails…Some industry experts, including a few longtime managers, believe some managers talk about succession solely to retain employees and clients, even though they have no plan to keep their firms running after they retire.”

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