And Another Thing . . . .

One other point should be made about the Chrysler bankruptcy issue. Currently, managers of investment funds are measured against a simple performance standard — in effect,they have a fiduciary duty to make as much money as they can, in compliance with the law, through investments that fall within their defined investment area. For example, managers of high-yield debt investment funds have a fiduciary obligation to maximize the legal return on their investments in high-yield debt, by making wise choices in their initial investment decisions and then pursuing every penny of return if the issuer of the debt goes into bankruptcy.

What happens, then, if a manager of a fund that invested in Chrysler debt caves in to government pressure and takes much less than the fund might have recovered through a bankruptcy proceeding? Is that person thereby breaching his or her fiduciary duties? If an investor brings a lawsuit claiming a breach of fiduciary duty, would it be a defense to say: “The President made me do it?”

Capitalism may seem cold-blooded, but the mission of a fund manager to maximize the legal return of an investment is a simple, straightforward obligation that can be assessed and measured. If you start to introduce other variables to the equation — politics, the environment, community goodwill, and so forth — you make the equation much more complicated. If people want to investment in “green” investment funds, or labor-friendly funds, they can do so. Most people, though, simply want their investment managers to provide as much money for their retirement as possible. If those managers allow themselves to be bullied into accepting less than they have a right to obtain, they aren’t really doing their job.

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