Put investments pros on corporate boards: AIMR

(May 14, 2003) Corporate boards of directors have few investment professionals, such as analysts or fund managers on them.

Boosting their presence could make boards more investor-focused argues the Association for Investment Management and Research (AIMR), which awards the chartered financial analyst designation.

In 2003, AIMR found only 11% of board directors at major companies globally were current or retired investment professionals. Canada lagged that global average, with only 4% of the members of boards of directors of the companies listed on the TSX S&P 60 hailing from the investment industry.

“When you look at the makeup of corporate boards around the world, you see CEOs and CFOs sitting on each other’s boards,” said AIMR president and CEO Thomas Bowman in a statement. “CEOs and CFOs think like CEOs and CFOs, not like investors. They’ve got the same perspective as management.”

The range of involvement of investment professionals on boards of directors varies widely by country, AIMR found. Of the companies listed on London’s FTSE 30 index, 21% of board members were investment professionals. The percentage was 17% for the Standard & Poor’s 100. At the other end of the scale, only 1% of board members were drawn from the investment services industry for the companies listed on Japan’s Topix 30 index.

AIMR says it used a broad definition of investment service professional to compile the survey, including investment bankers, venture capital firms, asset managers and investment advisors. Bowman also said that the number of directors who represent investors rather than management is probably lower than the 11% figure AIMR arrived at.

“You don’t see very many people at all whose full-time job is managing investment funds — people who work directly for the investor. It only makes sense that having more investment managers and advisors at the board table can make for a more investor-focused board,” Bowman added. “They have professional training in dissecting financial statements from the user’s perspective, rather than the preparer’s, assessing the future value of companies and developing investment strategies to meet their investing clients’ long-term objectives.”

Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

(05/14/03)