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About TheCenterLane.com
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.
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Getting Cozy
April 1, 2010
This week’s decision by the United States Supreme Court, in the case of Jones v.Harris Associates received a good deal of attention because it increased hopes of a cut in the fees mutual funds charge to individual investors. The plaintiffs, Jerry Jones, Mary Jones and Arline Winerman, sued Harris Associates (which runs or “advises” the Oakmark mutual funds) for violating the Investment Company Act, by charging excessive fees. Harris was charging individual investors a .88 percent (88 basis points) management fee, compared to the 45-bps fee charged to its institutional clients.
In his article about the Jones v. Harris case, David Savage of the Los Angeles Times made a point that struck a chord with me:
The lousy job that boards of directors do in protecting the investors they supposedly represent has become a big issue since the financial crisis, as Mr. Savage explained. Think about it: How could the boards of directors for those too-big-to-fail institutions allow the payouts of obscene bonuses to the very people who devastated our economy and nearly destroyed (or may yet destroy) our financial system? The directors have a duty to the shareholders to make sure those investors obtain a decent dividend when the company does well. If the company does well only because of a government bailout, despite inept management by the executives, who should benefit – the execs or the shareholders?
Michael Brush wrote an interesting essay concerning bad corporate boards for MSN Money on Wednesday. His opining point was another reminder of how the financial crisis was facilitated by cozy relationships with bank boards:
Michael Brush contacted The Corporate Library which used its Board Analyst screener to come up with a list of the five worst corporate boards. Here is how he explained that research:
I won’t spoil the surprise for you by identifying the companies with the bad boards. If you want that information you will have to read the full piece. Besides — you should read it anyway.
All of this raises the question (once again) of whether we will see any changes result in the aftermath of the financial crisis that will help protect the “little people” or the not-so-little “investor class”. I’m not betting on it.