Speculation swirled about succession planning at Fidelity Investments on Friday after a media report said the world’s biggest mutual fund firm was weighing splitting the posts of chairman and chief executive.
Abigail Johnson, daughter of the current chairman and CEO, is set to be the next chairman but not the CEO
BOSTON: Speculation swirled about succession planning at Fidelity Investments on Friday after a media report said the world’s biggest mutual fund firm was weighing splitting the posts of chairman and chief executive.
Abigail Johnson, 45, daughter of Fidelity chairman and CEO Edward Johnson, could be the next chairman but might not be the CEO, the Wall Street Journal reported, citing people familiar with the plans.
These people said Edward Johnson, whose father founded the privately held mutual fund company in 1946, told board members about the plans.
The company now has $1.5 trillion in assets under management, compared with just $13 million in 1946.
Anne Crowley, a company spokeswoman, declined to comment on any succession plans.
The reported plan surfaced as calls mounted for Fidelity to signal more clearly who will follow the 77-year-old Johnson in his posts.
Some observers have raised concerns about the Johnson family’’s tight control over the company, especially now that performance at its key mutual fund business is lagging.
“If the company was firing on all cylinders, we would have much less these concerns,” said Matthew Noll, senior credit officer at Moody’s Investors Service. Noll published a report this week that said Fidelity’s ability to compete was being affected by the lack of a clear succession plan.
Edward Johnson, who is called Ned, expressed doubts in recent months about his daughter’s readiness to run Fidelity, industry analysts who are familiar with the matter said.
By splitting the chairman and CEO roles, Johnson could allow his family to keep running the business but not have his daughter do it all immediately.
In one scenario, reported by the Wall Street Journal, Johnson envisioned having no CEO and having the heads of the operating units report directly to the board. The
Journal also said that the CEO might be an outsider.
“There is a plan in place to ensure a smooth transition, if Johnson should decide to step aside as chairman or for some reason he couldn’t continue as chairman,” Fidelity spokeswoman Crowley said.
She also said Fidelity “strongly disagreed’ with the conclusions of the Moody’s report that Fidelity’s ability to compete was being hampered.
Three members of the Johnson family are on Fidelity’s board of directors and control 49% of the firm’s voting stock. The firm’s main mutual funds business has been a laggard in recent years due to lackluster performance at its biggest funds and a string of senior executive departures.
But performance has improved in 2007.
According to funds flow research firm Financial Research Corp, Fidelity got net inflows of just $4.1 billion in its stock and bond funds in the first nine months of 2007 compared with more than $57 billion for its major rivals American Funds and Vanguard Group.
“In light of several negative trends in the company’s performance, Moody’s has growing concerns about the level of control exercised by Johnson and the degree to which there are independent checks on his control and that of Johnson family members involved in the management of the company,” Moody’s said in the November 7 report. The ratings firm did not change its Aa3 rating or the “negative” outlook on Fidelity.
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