Johnson to leave Fidelity board

Fidelity Investments executive Abigail P. Johnson is stepping down from the board of trustees that oversees the 366 mutual funds at the company her family controls, Fidelity said yesterday.

Johnson, who is widely expected to succeed her father, chief executive Edward C. Johnson III, at the helm of the world's largest mutual fund company, gave up day-to-day control of the company's core operations this year when she moved over to run its growing employer services business.

At the time, the company described the move as routine, though Fidelity's mutual funds did not perform strongly during Abigail Johnson's time at the helm. Yesterday, industry observers said her departure from the trustees may reflect a further diminution of her responsibilities, but also frees her to focus on the new role.

A Fidelity spokeswoman, Anne Crowley, described the decision to step down from the trustees by mid-January as a natural consequence of her new job, which no longer involves management of the mutual funds.

Morningstar Inc. analyst Chris Traulsen said he sees Abigail Johnson's new duties as a demotion, given the mediocre performance of funds like Magellan on her watch in recent years and the sweeping changes implemented by her successor, Stephen P. Jonas.

At the same time, Traulsen said, it makes sense for Abigail Johnson to leave the board since her new job gives her little to do with mutual funds. He also said Fidelity deserves credit for increasing the boards' independence.

''Symbolically you could read it as a further step down for her, but I don't think it's a big deal," he said.

Alternatively, Jim Lowell, editor of the trade newsletter Fidelity Investor, said, ''This could be an indication she's taken on the Herculean task of trying to create an institutional-services company out of thin air, and focusing on that."

Johnson's departure also will position Fidelity to comply with new federal rules that may go into effect soon, though Crowley said that wasn't part of the thinking behind the change. Those rules would limit the number of inside directors on fund boards. Johnson wasn't available to be interviewed, Crowley said.

The changes come as the independence of mutual fund boards is a hot issue among investors. These panels represent the interests of mutual fund shareholders, such as choosing the management companies that run the funds and negotiating their fees.

Currently the 14-member board includes four people who are officers of Fidelity itself, including both Johnsons. On Thursday executives said the leader of the 10 independent directors on the board, Marvin L. Mann, will retire and be replaced by former CIA chief Robert M. Gates Jan. 1.

Mann, 72, had hit the board's mandatory retirement age for independent directors, though the rule doesn't apply to inside directors like Edward Johnson, now 75, according to a Dec. 12 securities filing.

In May Fidelity said Abigail Johnson's duties would change from managing the company's core mutual fund business to running its services group, Fidelity Employer Services Co. Crowley noted that other former fund executives have also left the board when they took on new roles.

Still, those executives didn't attract the same attention from observers trying to predict the succession plans at Fidelity.

Abigail Johnson won't be replaced as a trustee, at least for the time being, Fidelity said, leaving the board with 13 members including three Fidelity officers.

Intentionally or not, the shift will help Fidelity comply with new regulations. Once Abigail Johnson leaves, 77 percent of the trustees' members will be independent, up from 71 percent and above the 75 percent threshold called for by new rules issued by the Securities and Exchange Commission. Currently only about half of a board's members must be independent.

The agency argued this will ensure that boards keep investors' interests at heart. But the rules are facing a court challenge from the US Chamber of Commerce, which argues the red tape isn't necessary. For instance, Crowley noted Fidelity's board has had a super-majority of independent directors, more than 70 percent, for many years.

Abigail Johnson's replacement running the funds, Jonas, joined the board of trustees this year. Securities filings show he replaced Laura B. Cronin, chief financial officer of Fidelity parent FMR Corp. Robert L. Reynolds, FMR's chief operating officer, is the third remaining Fidelity executive.

Ross Kerber can be reached at kerber@globe.com.