The naming of Patricia Dunn, chairman of Barclays Global Investors, to the board of directors of Hewlett-Packard Co. stands as a personal compliment to her abilities as an executive. But it ought to make clients and prospective clients consider what her directorship could mean to them in terms of potential benefits or conflicts of interest.
Barclays Global -- a major investor in Hewlett-Packard -- is the biggest index investment manager in the country, with holdings in hundreds of stocks. Although it invests passively, Barclays takes an active role in voting proxies in corporate governance issues.
Do clients want key executives at all their other investment management firms named to the boards of directors of companies, the same companies in which their managers invest? If it's all right for Ms. Dunn, why not other managers?
BGI faces a challenge of making sure, despite Ms. Dunn's directorship, it can carry out its investment management and shareholder voting responsibilities.
Joanne Medero, chief counsel at Barclays Global, said because the firm is a passive manager, no opportunities exist for it to benefit from Ms. Dunn's directorship. "We aren't traditional stock-pickers," she added. Ms. Dunn, she said, isn't involved in such investment decisions, and plays no role in corporate governance decisions on stocks Barclays Global holds.
Ms. Medero said clients will benefit from knowledge Ms. Dunn will gain at Hewlett-Packard on corporate structure, ideas she might incorporate in how Barclays Global runs its own business, even though that knowledge won't be used for investing. That seems like a good benefit for Barclays Global but more intangible for clients, who can always move their money to other index managers.