Readers of the new "Commonsense Corporate Governance Principles" for "America's public corporations and financial markets," as endorsed by JPMorgan boss Jamie Dimon, GE's Jeff Immelt, Vanguard Group's Bill McNabb, BlackRock's Larry Fink and other corporate masters, quickly noticed many of the signers are both board Chairman and also Chief Executive Officer -- even though the guidelines discourage doubling those jobs, and point out that "every board needs a strong leader who is independent of mangement."
When independent directors don't agree they need a Chairman of their own, they should at least set up "a strong lead independent director with clearly defined authorities and responsibilities," the guidelines add.
Malvern-based Vanguard's McNabb is among the leaders who hold both management and board supremacy. Vanguard is a private company, owned by its funds, controlled by its board and management. So "the Vanguard fund board appoints a lead independent director to coordinate the activities of the independent directors, chair all meetings of the independent directors and oversee the board's agenda," and also chair each board committee, says Vanguard spokesman John S. Woerth.
The identity of that lead director isn't posted on Vanguard's online board list. He is currently Mark Loughridge, retired CFO at IBM and director of Dow Chemical, which is about to combine with Wilmington-based DuPont Co., and a Vanguard director since 2012, Woerth told me, since I asked.
Thomas O'Brien, 79-year-old onetime chairman and CEO of PNC, the largest Pennsylvania-based bank, serves as lead director at publicly-traded BlackRock, one of the few U.S. investment firms larger than Vanguard. His role is listed on BlackRock's Web site.
Vanguard doesn't have to have a lead director, or disclose it, says Charles Elson, corporate-governance scholar at the University of Delaware: "They're a private company," he reminded me.
Even with a "lead" director, "I just don’t believe there is any 'independence' on a board like that, nor for that matter on most boards," Daniel Wiener, publisher of the Independent Adviser for Vanguard Investors, told me.
"Do you think Vanguard's governance is any better than any other company where the board members are hand-picked by the board chair" and other appointees? He noted that Vanguard fund voters had agreed to waive voting requirements on fee sharing and other policy changes. "Not that most shareholders wouldn’t just go along with a Vanguard recommendation anyway."
As Independent Lead Director, Vanguard's Loughridge succeeded Al Rankin, longtime boss at Ohio-based holding company NACCO Industries, who served as Vanguard's Lead Independent Director from 2006-14, Woerth added.
The "authorities and responsibilities" of the trustees, Woerth told me, are listed in Vanguard's fund prospectus, Part B:
"All but one of the trustees are independent." (The exception being the chairman, CEO McNabb.) "The independent trustees designate a lead independent trustee.
"The lead independent trustee is a spokesperson and principal point of contact for the independent trustees and is responsible for coordinating the activities of the independent trustees, including calling regular executive sessions of the independent trustees; developing the agenda of each meeting together with the chairman; and chairing the meetings of the independent trustees, including the meetings of the audit, compensation, and nominating committees.
"The board also has two investment committees, which consist of independent trustees and the sole interested trustee.
"The independent trustees appoint the chairman of the board. The roles of chairman of the board and chief executive officer currently are held by the same person; as a result, the chairman of the board is an “interested” trustee.
"The independent trustees generally believe that the Vanguard funds’ chief executive officer is best qualified to serve as chairman and that
fund shareholders benefit from this leadership structure through accountability and strong day-to-day leadership."
Added Woerth: "We strongly believe that our governance structure is highly effective" for funds and their shareholders.
