Ex-CIA chief gets key Fidelity post
SEC rule could turn Gates into top pick for chief of trustees
Fidelity Investments' independent trustees have named Robert M. Gates as their new chairman, executives said yesterday, making the former CIA director the top watchdog of the world's largest mutual-fund company.
On Jan. 1 Gates, 62, will replace current chairman Marvin L. Mann, who recently reached the mandatory retirement age of 72, said a spokeswoman, Anne Crowley.
Gates, already a Fidelity fund director, will remain president of Texas A&M University.
Gates's appointment also makes him the likely candidate to become the chairman of Fidelity's trustees if a rule issued by the Securities and Exchange Commission goes into effect requiring funds' boards of trustees to be led by outsiders, investment specialists said.
Boards of trustees at mutual-fund groups are charged with representing the interests of the fund's shareholders. They have the power to choose an investment company to manage and invest the fund's holdings. In practice, the trustees rarely exercise the power, even if performance is poor. Most often, trustees negotiate over the size of fees the management company charges.
Most boards of trustees are composed of a mix of independent outsiders and management company executives. At Fidelity, for example, company executives hold four of the 14 seats on the board, which oversees the company's 366 mutual funds.
Fidelity chief executive Edward C. Johnson III has fought hard against the requirement that an outsider be given the powerful role of chairman, arguing the independent trustees already can remove him and pick an outsider if they wish. A court battle over the issue is underway in Washington.
In a telephone interview yesterday, Gates said the Fidelity trustees haven't discussed what might happen if the SEC rule goes into effect, and added he doesn't have specific changes in mind for the company. Gates said he agrees with Johnson the new rule isn't necessary.
''At this point our view is that independent trustees have complete control of the agenda of our meetings, so we haven't felt we have had to address the issue," Gates said.
Through a spokeswoman, Johnson declined to be interviewed. Because of Johnson's outspoken views and Fidelity's size, its policies draw fire from critics who say trustees should be more independent.
Max Rottersman, president of Fundexpenses.com, a New Hampshire company that advises other mutual-fund boards, said he's seen little to suggest that Gates will approach the job differently than Mann or do more to challenge the Johnsons' control. But Gates would be the natural candidate to step into the independent director's role if it is required, Rottersman said, adding the new responsibilities could empower him to be more outspoken.
''Once they get the power where they start to think they represent society, it's a different set of rules," he said.
Trustees are well-compensated. Mann made $484,250 in total compensation last year, while Gates made $362,250, according to a Fidelity securities filing.
The company calls certain trustees ''independent" if they don't hold interests in Fidelity's parent, FMR Corp., or its affiliates. A Fidelity charter also states that independent directors must be willing to play ''an adversarial role in pursuing the best interests of the funds and shareholders."
Mann said he couldn't remember such a case happening during his tenure. ''I'm normally not scrappy with the Johnsons," he said. Since taking over as independent chairman in 2001, Mann has spoken publicly on a few issues such as testifying before the US Senate in 2004 in support of Johnson's position on independent oversight.
Gates said the board has pushed the company on other fronts, such as having it strike deals with investment banks to ''unbundle" their trading commission fees from other services such as the cost of research.
Gates's day job in Texas could create time pressure, he acknowledged. Gates said he's made clear to the boards of both groups that he'll need the time to keep both jobs -- including spending up to 10 days a month on Fidelity business, half on weekends.
He also flies to Boston 11 times a year for board meetings, he said. In the eight years since he was named to Fidelity's fund board in 1997, Gates said he's missed just one meeting -- held the weekend last year when the university dedicated a memorial to students who died in a bonfire accident there.
''I've never lost sight of my priorities," Gates said.
Fidelity approved the succession at a meeting Dec. 15, Gates said, though the company hasn't discussed the changes publicly until now. Also, to replace Mann, the board named as an independent trustee Albert R. Gamper Jr., previously head of commercial finance company CIT Group Inc., Gates said.
Gates said his succession at Fidelity was made likely about a year ago when he was named vice chairman of the companies' independent trustees. President George H.W. Bush named him to head the Central Intelligence Agency, which he ran from 1991 to 1993. He was named president of Texas A&M in 2002.
Ross Kerber can be reached at kerber@globe.com. 