AIM board chairman Bruce Crockett tells us what goes on at AIM's board meetings.
Fund directors are in the news. The Supreme Court gave them some slack in the Harris ruling but underlined the importance of fund companies getting them complete information and directors comparing mutual fund fees with those of comparable institutional funds. Yet, fund directors do their work behind closed doors and disclosure is limited, so it's awfully tough to know whether directors are asking difficult questions.
Laura Lutton, Ryan Leggio, and I spoke with Bruce Crockett, independent trustee and chairman of Invesco AIM Funds' board and a member of the Investment Company Institute's Board of Governors (the investment industry's trade association). Crockett has been more open than most directors about what the board actually does. He's even gone so far as to publish his e-mail address in shareholder communications so that any AIM shareholder can communicate directly with him. Here's the transcript.
Russ Kinnel: Can you give us a quick rundown of your take on the Supreme Court's Harris ruling?
Bruce Crockett: It was a very sound decision on the part of the Supreme Court. It obviously reaffirmed Gartenberg, and it established a very high standard, what I would call a "Delaware court standard" for second guessing directors.
It seems to me that the directors are being told to do what the good directors have been doing all along. Not too much has changed.
Clearly, there are some academics who [have] said things like, "Well, this opens the door for fee cases."
I would argue that the door was always open for fee cases, in a sense. I don't see this as opening the door any wider. In fact, I see it establishing an even higher threshold. If the directors are doing their job--they're diligent, they have access to all the information, and they're prudent in the process that they go through in making their determination--I don't see how fee cases will go anywhere.
This case argues that there are differential fees between institutional and retail funds that directors should take into account. Well, I'll submit to you that where they're relevant, directors have been taking them into account all along.