PIMCO, a global investment management firm, said the nomination process of trustees to its board is now easier for its shareholders. Analysts and members of the academics concerned about the oversight of the firm praised the move of the firm.
The report from Reuters cited that PIMCO’s move would help the firm improve its fund stewardship’ fair grade, but it could also intensify the ongoing discussion on how much oversight the board should provide for the fund.
PIMCO’s board is composed of five independent trustees and two trustees working for the firm. Brent Harris is the managing director and chairman of the board of PIMCO.
Under the new rules, shareholders with an investment of at least $25,000 for two years will now be able to nominate a candidate to the board of trustees. Prior to the implementation of the new rules, shareholders are required to own at least 5 percent of a fund for two years to be able to nominate a candidate in the board.
PIMCO also removed other minor restrictions on the nomination process, but it does not accept shareholders as candidates to the board.
According to Eric Jacobson, senior analyst at Morningstar, Inc. (NASDAQ:MORN), PIMCO’s new rules for nomination are practical for the average fund shareholders to nominate a trustee. He said, “This dramatically increases the possibility that someone could reach the threshold to make the nomination.”
Jacobson also stated that the firm still maintains a “tremendous discretion” because it does not allow shareholders as candidates to the board. He also believed that the firm’s prior strict rules for nominations were designed prevent shareholder takeovers.
PIMCO received an overall stewardship grade of “C” from Morningstar. Its competitors, such as American Funds and Dodge & Cox, received an “A” stewardship grade from Morningstar, Inc. (NASDAQ:MORN).
Meanwhile, E. Han Kim, professor of finance at the University of Michigan opined that the change would help the company attract more customers. He said, it “will make them look good to investors. It’s low cost advertising from their perspective.
PIMCO did not provide any explanation related to changes in its rules for shareholder nominations in its regulatory filing dated October 23. The firm has $1.92 trillion assets under management and $1.5 trillion third party client assets as of September 30, 2012. William Gross is the founder and serves as co-CIO of PIMCO.