SEC
Interview: T. Rowe Price---Riepe, James--Chairperson of the Board
>> Welcome back. on wednesday, the s.e.c. will vote to decide whether to require the chairman of mutual fund boards be independent of the management company. if approved, some of the biggest names in the fund management business would have to give up the title “chairman,” including our next guest. james riipi, vice chairman of the t. rowe price group, joins us now from the firm. in baltimore. and as we said earlier, you were opposed to this. some would say, clearly, because he has to presumably give us a lucrative position. why, aside from that, are you opposed to this proposed move by the s.e.c.?
>> first of all, it’s not a lucrative position. all of us who serve as chairman of the funds do not get paid for that. so it has nothing to do with a monetary value. we’re not opposed to having independent chairmen. what we’re opposed to is the s.e.c. decreeing for some 8,000 mutual funds that every single one of them has to have an independent chairman and that the board members don’t get to make that decision.
>> just for the record, how many funds are you currently the chairman of?
>> about 90.
>> and i believe the current heavyweight champion, to use that term, would be fidelity’s ned johnson, the chairman of every single fidelity fund, 292?
>> right. obviously, there’s a big difference between being the chairman of a mutual fund and being a chairman of a normal corporation. all of the activities of the funds are almost identical except for their investment programs. so that’s why the industry has evolved to have a common chairman, to the extent that we would have to have 90 separate boards and 90 separate chairs for every one of the mutual funds, you could imagine what the cost to investors would be.
>> why is a seemingly logical argument falling on deaf ears in washington?
>> i don’t know. i think it’s gotten caught up in this political environment that we’re in right now and there seems to be a contest between some of the legislators on capitol hill and the s.e.c. it strikes me as unusual that with all the problems of the real corporate world that this was never decreed by the s.e.c. and as they shift increasing amounts of responsibility to independent directors, i don’t understand why they would not allow those independent directors the ability to choose their own chairmen.
>> explain to me, you’re the chairman of 90 funds, what does that entail day to day? there a duty or something for you to do aside from your running t. rowe price?
>> no, there really is not much on a dayto day-to-day basis that the independent chair does. quite frankly, the independent chair runs the meeting at the time that the board meets. but the agenda, for example, which in the corporate world, if you consult the agenda, the chairman has a good bit of power. in the mutual fund world, the agenda is controlled by the attorneys and regulators because there’s so much required work that the directors have to do every time they meet so we do not have the advantage of controlling the agenda as it has been speculated.%
>> given the abuses in the% number of scandals uncovered in the past two years, i think you would agree that some sort of contrition would be needed on the part of the fund industry. so if not this, then what?
>> i think there’s a lot of contrition on the part of those in the industry who have been accused of violations, as well as for those of the rest of us who have not. i think that the s.e.c. has done a wonderful job in putting forth% -a long list of very major reforms, several of which have great teeth on them like the super majority of independent% -directors, at least 75% compliance officers, compliance policies and procedures, things like that. so i think there has been, not to use your word “atonement,” but substantial reform proposed and backed by the industry and certainly supported by me. i think in this particular issue, quite frankly, it achieves very little other than cosmetic cosmetic issues and causes organizations like ours in particular, problems.
>> there’s a lot of focus. i think perhaps the title, just the “chairman” of a fund, excuse me, with all of the corporate malfeasance that has been uncovered, is that perhaps the source of some of the problems in terms of the public outcry that chief executives are overpaid and and and unaccountable and there’s confusion based on the title that you hold?
>> i think there may be something to that. we haven’t had anything like the problems that some of the corporations and overpayments you talk. have had. what we have had is market timing, excessive trading, issues as well as some of the others. and they have been very much prosecuteed and some of the reforms that have not yet been approved are targeted% specifically at those uvs offenses.% what happened was, once those scandals began, those who had governance agendas for mutual funds leaped into the vacuum and that’s what’s been embraced here.
>> we thank you for joining us and we will continue to follow this topic, folks, and that is james riipi, vice chairman of t. rowe price. stay with us. there’s still more coming up after the break. and if i knew what it was, i would tell you, so we’ll all be surprised. walgreens, there you go.
