| An entire book could be written about the happy | | | | Company management gets to decide who |
| conspiracy between corporate managers and the | | | | handles these assets on behalf of their |
| investment community that pads both pockets at | | | | employees. Corporate managers who take a dim |
| the expense of the everyday shareholder. In fact, | | | | view of shareholder activism (and who does, |
| one has been written. You should check out "The | | | | except those that are abusing shareholders?) are |
| Battle for the Soul of American Capitalism" by | | | | unlikely to award this business to institutions who |
| John Bogle, the founder of the Vanguard Group. | | | | meddle too much. Management wants |
| Bogle has been one of the few mutual fund | | | | shareholders to blindly follow the |
| industry luminaries that publicly decry the abuse | | | | recommendations of management. Shareholders |
| taking place. It is an easy read. Check it out. Many | | | | who file corporate resolutions and offer up |
| of my top ten reasons are touched on in this | | | | competing board slates are not likely to get a |
| book. | | | | piece of the company's investment assets. |
| Over fifty percent of corporate America is | | | | The second conflict is similar to the first. So many |
| owned by the top 100 financial fiduciaries. One | | | | of the mutual fund industry's parent companies |
| would think that this alone would make them the | | | | also have operations in investment banking. They |
| most vigilant voices in the boardroom. In fact, | | | | are reluctant to raise hay because offending their |
| few mutual funds demand accountability from | | | | management clients may result in their firms being |
| management, and in many of the most egregious | | | | left out in the cold when it comes to investment |
| cases, they are guilty of downright aiding and | | | | banking deals. |
| abetting the fudging of numbers and the looting of | | | | This is really a shame. Mutual funds have the |
| otherwise good corporations. Why? Two glaring | | | | expertise, the resources, and the position to |
| conflicts of interest prevent the industry from | | | | demand accountability from management. Instead, |
| becoming the activists that they should become. | | | | management has used the diffusion of corporate |
| First, every company is a potential client for 401k | | | | ownership to increase their pay, fudge the |
| and pension administration. Over half of invest-able | | | | numbers, cut sweetheart deals, etc. Bogle calls |
| assets are in defined contribution plans (401k, | | | | this a transition from "owners' capitalism" to |
| 403b, etc) or defined benefit plans (pensions). | | | | "managers' capitalism". |