Funds, Corporate Governance and Christian Dior

Chidem Kurdas

Most funds do not bother to try to shape corporate governance; if they don’t like what’s going in a company, they just sell it. But there are exceptions.

Sometimes funds vote against corporate compensation packages, usually on the ground that company executives are not doing a good job and do not merit bonuses or other remuneration they’re getting.

In other instances a particular executive or director gets thumbs down. An interesting  example that happened this year: AQR voted against the appointment of  Bernard Arnault, chairman of luxury conglomerate LVMH, as a director of Christian Dior.

Mr. Arnault owns much of LVMH – the initials stand for Louis Vuitton Moët Hennessy –and Dior. Why AQR objected to him as director is not clear, but a corporate governance expert says his interests are not necessarily in line with the interests of other shareholders.

AQR approved other proposals by the Dior management and did not seem to be pursuing an activist strategy. Activist shareholders by definition intervene in corporate management, but effective activism typically requires the shareholder to hold a relatively large position for a long time.

This March Mr. Arnault fired Dior’s star designer John Galliano, who made headlines with a racist outburst in a Paris bar. The Dior collection designed without Mr. Galliano was judged to be weak.


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