Ameriprise-Columbia deal could mean board seat cuts

BOSTON (Reuters) - Ameriprise Financial Inc (AMP.N) has promised cost-cutting as part of its $1 billion purchase of Bank of America Corp's (BAC.N) long-term asset management business -- and the trimming could start at the top.

Directors who oversee the bulk of the $165 billion of Columbia Management funds being sold are in talks to combine the two largest fund boards with Ameriprise's own funds board, according to an industry consultant who has spoken with executives in both fund groups.

Combining the boards could mean the elimination of about 17 of 29 fund director jobs, said the source, speaking on condition of anonymity because the comments were not authorized.

That would save several million dollars a year in salaries for directors, who are often prominent executives or professionals receiving more than $200,000 annually for their part-time work representing shareholder interests.

"This would be a good outcome for the shareholders because it would reduce governance costs," the source said.

William Carmichael, chairman of one of the Columbia fund boards, declined to comment. Members of the other fund boards did not respond to Reuters inquiries.

An Ameriprise spokesman said it had not been decided what will become of the boards. A Bank of America spokesman said it was too early for it to comment on possible board consolidation, but added that this would be decided by the boards themselves.

RUBBER STAMPS?

Just how much oversight mutual fund boards should provide has been a hot topic in the industry for years, after revelations that many asset managers were allowing employees and fund customers to trade rapidly in and out of stocks for their own gain, boosting costs for other investors.

In theory, fund boards work for the shareholders and approve deals management companies strike with the mutual funds.

In practice, the boards have often been criticized for rubber-stamping management proposals on matters such as fees and how much to pay executives.

Oversight at Columbia is particularly complex because the fund family was assembled from various funds created by smaller banks that Bank of America purchased over the years.

In addition to Carmichael's board and another large one, Columbia operates a board to oversee its Acorn fund line. The Acorn board is not currently part of the merger discussions, the source said. It was not clear how the money market funds remaining with Bank of America might be overseen.

Each fund board has seven to 12 members; each director was paid up to $302,500 last year, according to securities filings.

The board that oversees Ameriprise's RiverSource mutual funds includes former Minnesota Governor Arne Carlson and Kathleen Blatz, a past chief justice of the Minnesota Supreme Court. They were paid $187,500 and $182,500, respectively, last year, a security filing shows.

University of Mississippi professor Mercer Bullard said he would support eliminating at least some director positions if the fund boards overlap as the Ameriprise-Bank of America deal closes next year.

"What should happen is a merging of the boards that should result in a fair number of resignations," said Bullard, who heads an advocacy group for fund shareholders.

(Reporting by Ross Kerber; editing by John Wallace)