Ann Lipton's got a great point:
Earlier this week, the Wall Street Journal reported that many institutional investors – including large mutual fund complexes like BlackRock and State Street – have become concerned about “overboarding,” namely, the phenomenon where corporate directors sit on multiple boards.
There are good reasons to be concerned. Researchers have found that in many, though perhaps not all, cases when corporate directors are “overboarded” – and thus presumably unable to devote their full attention to governance at particular companies – companies are less profitable and have a lower market to book ratio. (Similarly effects are found for distracted directors.)
That said, there’s a particular irony in seeing mutual fund companies, of all investors, leading the charge. Most mutual fund companies employ a single board – or a few clusters of boards – to oversee all of the funds in the complex. This can result in directors serving on over 100 boards in extreme cases. State Street’s Equity 500 Index Fund, for example, reports trustees who serve on 72 or 78 boards within the complex. BlackRock’s Target Allocation Funds have trustees who serve on either 28 and 98 different boards (depending on how you count).
Overboarding is a serious concern, as Ann points out. But, as she also points out, the mutual fund industry needs to remove the log from its eye before complaining about the splinters in public company eyes.
