Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Friday, December 02, 2005

Reason #6 to Fire Your Mutual Fund Company

Fifth in a Series

The next several posts are going to be dedicated to the proposition that small investors are getting ripped off with mutual funds thanks to a complex scheme of self-dealing and back scratching.

Reason #5 - Enablers of Poor Corporate Governance

An entire book could be written about the happy conspiracy between corporate managers and the investment community that pads both pockets at the expense of the everyday shareholder. In fact, one has been written. You should check out "The Battle for the Soul of American Capitalism" by John Bogle, the founder of the Vanguard Group. Bogle has been one of the few mutual fund industry luminaries that publicly decry the abuse taking place. It is an easy read. Check it out. Many of the top ten reasons are touched on in this book.

Over fifty percent of corporate America is owned by the top 100 financial fiduciaries. One would think that this alone would make them the most vigilant voices in the boardroom. In fact, few mutual funds demand accountability from management, and in many of the most egregious cases, they are guilty of downright aiding and abetting the fudging of numbers and the looting of otherwise good corporations. Why? Two glaring conflicts of interest prevent the industry from becoming the activists that they should become.

First, every company is a potential client for 401k and pension administration. Over half of invest-able assets are in defined contribution plans (401k, 403b, etc) or defined benefit plans (pensions). Company management gets to decide who handles these assets on behalf of their employees. Corporate managers who take a dim view of shareholder activism (and who does, except those that are abusing shareholders?) are unlikely to award this business to institutions who meddle too much. Management wants shareholders to blindly follow the recommendations of management. Shareholders who file corporate resolutions and offer up competing board slates are not likely to get a piece of the company's investment assets.

The second conflict is similar to the first. So many of the mutual fund industry's parent companies also have operations in investment banking. They are reluctant to raise hay because offending their management clients may result in their firms being left out in the cold when it comes to investment banking deals.

This is really a shame. Mutual funds have the expertise, the resources, and the position to demand accountability from management. Instead, management has used the diffusion of corporate ownership to increase their pay, fudge the numbers, cut sweetheart deals, etc. Bogle calls this a transition from "owners' capitalism" to "managers' capitalism".

Tomorrow: Reason #5 - Fresh Out of High School "Investment Advisers"

3 Comments:

Anonymous trust deed said...


putnam investment Stock Investing - You Can Earn More Profit When Making Stock Decisions In Groups.
Do you want to generate extra dollars and new friends in the stock market? You Don't Have To Be An Expert Stock Broker To Get Started Today!

Are you alone when you make your stock decisions? Do you think you could benefit from using the minds of several interested stock market hobbyists all determined to make sure you have your money invested in the right shares? Stock Investing putnam investment

11:20 AM

 
Blogger DiSCo said...

Really trustworthy blog. Please keep updating with great posts like this one. I have booked marked your site and am about to email it

to a few friends of mine that I know would enjoy reading..
seslisohbet
seslichat
sesli sohbet
sesli chat
sesli
sesli site
görünlütü sohbet
görüntülü chat
kameralı sohbet
kameralı chat
sesli sohbet siteleri
sesli chat siteleri
görüntülü sohbet siteleri
görüntülü chat siteleri
kameralı sohbet siteleri
canlı sohbet
sesli muhabbet
görüntülü muhabbet
kameralı muhabbet
seslidunya
seslisehir
sesli sex

10:29 AM

 
Blogger Sesli Chat said...

Really trustworthy blog. Please keep updating with great posts like this one. I have booked marked your site and am about to email it

to a few friends of mine that I know would enjoy reading..
seslisohbet
seslichat
sesli sohbet
sesli chat
sesli
sesli site
görünlütü sohbet
görüntülü chat
kameralı sohbet
kameralı chat
sesli sohbet siteleri
sesli chat siteleri
sesli muhabbet siteleri
görüntülü sohbet siteleri
görüntülü chat siteleri
görüntülü muhabbet siteleri
kameralı sohbet siteleri
kameralı chat siteleri
kameralı muhabbet siteleri
canlı sohbet
sesli muhabbet
görüntülü muhabbet
kameralı muhabbet
birsesver
birses
seslidunya
seslisehir
sesli sex

6:42 AM

 

Post a Comment

Links to this post:

Create a Link

<< Home