In the spring of 2005, Fidelity chairman Edward C. Johnson III sent a board trustee to deliver a message he could not bring himself to tell his daughter, Abigail Johnson: she was about to lose a senior role at the company. The trustee, Marvin Mann, called her one Sunday morning and asked if he could stop by her home in Milton, Massachusetts. That visit set off one of the most turbulent episodes in Fidelity’s 80-year history, as the Johnson family’s control over the private investment giant appeared to be unraveling.
At the time, Fidelity oversaw about $18 trillion in assets, generated more annual revenue than BlackRock, and handled retirement savings for one in five U.S. adults. Abby Johnson, then 64, had risen to lead the firm’s sprawling investment businesses, but her path had been marked by internal criticism, weak fund performance, outflows, departures of talented managers and an embarrassing trading-desk bribery scandal. Her conflict with her father was also growing sharper, and by late 2004 Bob Reynolds, Johnson’s top deputy, had pressed Edward Johnson to replace her as head of the mutual-fund business.
Johnson said he gave his daughter three more months to improve, but when that period ended, Reynolds asked Mann to persuade him to remove her. Mann told Abigail that her performance was poor, citing weak fund results and falling sales. Days later, Edward Johnson told her the decision was final and offered her leadership of Fidelity’s philanthropy arm. She replied, “I’m resigning.” Johnson then tried to keep her inside the firm by offering her FESCO, Fidelity’s employer retirement-plan business, which had major operational problems despite its huge success under Reynolds. Reynolds told her, “You’re smart, Abby, but you’re not your father.”
The dispute widened into a possible family revolt. Abigail believed Reynolds was trying to push her out ahead of a sale of Fidelity, something she opposed. Around the same time, Edward Johnson met with Bank of America’s Ken Lewis and JPMorgan Chase’s then-CEO-designate Jamie Dimon, though he denied wanting to sell. By April 2005, Abigail had signaled she might oppose reelecting the board and had enlisted family members and allies, prompting Reynolds to warn her father of a planned move against him. The showdown eased before the board meeting, and Fidelity ultimately remained under family control.
At the meeting, Johnson proposed issuing additional shares, which increased his stake to 41% and reduced Abigail’s to 23%. The board then unanimously backed all directors, Johnson stayed chairman and controlling owner, and Abigail returned to running FESCO. In the years that followed, she rebuilt the retirement business, expanded her role in other Fidelity operations, and the confrontation helped push Edward Johnson to establish a formal succession plan.
