Bogle Puts Blame and Shame On The Big Money Managers

Vanguard’s founder John Bogle, long a CNBC curmudgeon and dour voice in the wilderness, is starting to call for a new law that would make institutional money managers more responsible for, well, almost everything.

He tells Gretchen Morgenson in tomorrow’s Times:

“We need Congress to pass a law establishing the basic principle that money managers are there to serve their shareholders. And the second part of the demand is that fiduciaries act with due diligence and high professional standards. That doesn’t seem to be too much to ask.”

Institutional money managers that aren’t huge short-sellers or well-known activists have made a little noise in the past. Tweedy Browne pushed Conrad Black hard, leading to his demise and Morgan Stanley’s Hassan Elmasry unsuccessfully poked the Sulzberger’s control of the Times in 2007 before eventually selling his position.

Bogle wants them to be more involved in pushing the boards, watching CEO compensation and being stronger advocates for the people whose money they are managing. After all, they have enough size to use that clout for change.

The hitch in Bogle’s plan: the inclination to stir up the pot (and thus hurt performance) may frequently clash with the managers’ incentive to beat their respective benchmarks in a particular quarter. Pension and institutional fund managers are just more likely to quietly vote with their feet.

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