At the CFA Institute conference in Boston this morning, Jack Bogle spoke passionately of the need for institutional money mangers--most of whom, he says, now manage both mutual fund and pension assets--to increase their attention to corporate governance. Decrying "the silence of the funds," he noted that no mutual fund company has ever filed a shareholder proposal opposed by management. "Never," he stressed. "That's not very often." The Vanguard mutual fund founder also said proxies also need to be more actively voted, especially with regard to "excessive executive compensation." Part of the problem, he said, is that mutual funds have moved from the "own-a-stock" mentality of his youth (typical fund turnover was about 20 percent in 1950) to a "rent-a-stock" model (average turnover today is 100 percent).
He urges a return to a longer-term view. He also recommends the return of Glass-Stegall--although he knows it's an uphill battle--and supports many of the aims of proposed financial regulation. At the same time, he criticizes the lack of specificity of many of the bill's provisions, and the fact that Congress intends to act in June although the Angelides commission won't report back on crisis causes till December.
Finally, he urged funds to take governance into account in security analysis, and says he'd favor a federal statute to clarify fiduciary responsibility (this would cover conflicts of interest and the need to attend to governance issues).
Kimberly Gladman - Director of Research and Risk Analytics
