Michael L. Smith
About Michael L. Smith
Michael L. Smith, 53, serves as Co‑Chairperson of the Board and an interested (non‑independent) director of Ares Capital Corporation (ARCC). He has been a director since October 2022 and became Co‑Chair in October 2024; his current term (Class II) expires at the 2027 annual meeting. Smith is Partner and Co‑Head of the Ares Credit Group, serves on Ares’ Operating Committee, and is Co‑Chief Executive Officer and trustee of Ares Strategic Income Fund (ASIF). He holds a B.S. in Business Administration (University of Notre Dame) and a Master’s in Management (Kellogg).
Past Roles
| Organization | Role | Tenure | Committees/Impact |
|---|---|---|---|
| Ares Capital Corporation | Co‑President | Jul 2014 – Oct 2022 | Senior leadership overseeing portfolio origination and management; later transitioned to director/Co‑Chair |
| RBC Capital Partners | Partner | Prior to joining Ares in 2004 | Led middle market financing and principal investment business |
| Indosuez Capital | Merchant Banking Group | Prior to RBC | Executed leveraged transactions across products/asset classes |
| Salomon Brothers Inc | Debt Capital Markets & FIG | Prior roles | Investment banking roles in capital markets and financial institutions |
| Kenter, Glastris & Company | Professional role | Prior role | Investment/finance experience (details not further disclosed) |
External Roles
| Organization | Role | Status/Start | Notes |
|---|---|---|---|
| Ares Strategic Income Fund | Co‑Chief Executive Officer; Interested Trustee | Current | Also on ASIF Investment Committee |
| CION Ares Diversified Credit Fund | Vice President | Current | Registered product role within Ares complex |
| Ares Credit Group (Ares Management) | Partner; Co‑Head; Operating Committee member | Current | Member of USDL, Opportunistic Credit, Commercial Finance and other investment committees |
Board Governance
- Board leadership: Smith and Mitchell Goldstein serve as Co‑Chairs of ARCC’s Board (both interested directors).
- Independence: Smith is an “interested director” under the Investment Company Act due to his roles with Ares and ASIF; he is not independent.
- Lead Independent Director: Eric B. Siegel (since 2010) chairs executive sessions of independent directors.
- Committees: Audit, Nominating & Governance, and Co‑Investment Committees are composed solely of independent directors; Smith does not serve on these committees.
- Meeting activity and attendance: In 2024, Board held 8 meetings; Audit 6; Nominating & Governance 2; Co‑Investment 22. All directors then in office attended at least 75% of Board and relevant committee meetings; four directors attended the 2024 annual meeting (virtual).
- Executive sessions: Independent directors meet in executive session periodically, at least annually, without interested directors present.
- Term: Class II director; term expires at 2027 annual meeting.
Fixed Compensation
| Component | Amount/Terms |
|---|---|
| Director fees from ARCC | None (no compensation paid to interested directors) |
| Executive compensation from ARCC | None (ARCC has no employees; executives receive no direct compensation) |
| Compensation source | Smith is compensated by Ares Management and/or affiliates for his roles there (amounts not disclosed in ARCC proxy) |
Performance Compensation
- ARCC does not pay equity or incentive awards to directors; interested directors receive no ARCC compensation. No ARCC performance metrics (TSR, EBITDA, etc.) are tied to Smith’s pay.
- Clawback policy: ARCC maintains a clawback policy compliant with Nasdaq rules for incentive‑based compensation of executive officers; it applies to executives, not directors.
Other Directorships & Interlocks
| Company | Public/Registered | Role | Potential Interlock/Notes |
|---|---|---|---|
| Ares Strategic Income Fund | Registered investment company | Co‑Chief Executive Officer; Interested Trustee | Ares‑affiliated; oversight interlock via investment committees |
| CION Ares Diversified Credit Fund | Registered investment company | Vice President | Ares‑affiliated registered product |
- Related‑party ecosystem: ARCC is advised by Ares Capital Management (subsidiary of Ares); Smith is Partner at Ares and on Ares investment committees. Independent committees oversee related‑party and valuation matters; Audit Committee reviews/approves related‑party transactions.
Expertise & Qualifications
- Deep experience in investment management, leveraged finance, and financial services; senior roles across Ares investment committees (USDL, Opportunistic Credit, Commercial Finance, Secondaries PE, Infrastructure).
- Education: B.S. (University of Notre Dame); Master’s (Kellogg Graduate School of Management).
Equity Ownership
| Metric | Value |
|---|---|
| Beneficial ownership (May 13, 2025) | 240,012 shares; <1% of class (694,181,754 shares outstanding) |
| Composition | 151,012 direct; 89,000 via family trust |
| Beneficial ownership (Mar 5, 2025) | 240,012 shares; <1% of class (681,588,467 shares outstanding) |
| Dollar range (Directors) | Over $100,000 |
| Dollar range (Portfolio managers) | Over $1,000,000 |
| Hedging & pledging | Prohibited for directors/officers (no hedging or pledging of ARCC stock) |
| Ownership guidelines | Directors must hold equity equal to 2.5x independent director annual cash retainer; all directors were in compliance as of Mar 5, 2025 |
Governance Assessment
- Independence and conflicts: Smith’s “interested” status and senior roles at Ares (the investment adviser and administrator affiliates serve ARCC) present inherent conflicts of interest and multi‑hatting risk. ARCC addresses these via independent‑only Audit/Nominating/Co‑Investment Committees, lead independent director oversight, and Investment Company Act restrictions on related‑party transactions and leverage.
- Board effectiveness: Clear separation of oversight (independent committees) from interested leadership; robust meeting cadence and attendance; routine executive sessions; audit committee deemed to include “financial experts.”
- Ownership alignment: Meaningful personal shareholding, compliance with stock ownership guidelines, and prohibitions on hedging/pledging support alignment with shareholders.
- Compensation structure: No ARCC compensation to interested directors reduces pay‑related conflicts at the ARCC level, though compensation from Ares is not disclosed in ARCC proxy.
RED FLAGS
- Interested director and Co‑Chair while being a Partner/Co‑Head at Ares (adviser/administrator affiliate) — structural conflict risk; mitigated but not eliminated by independent committee architecture and regulatory constraints.
- Multiple Ares investment committee roles (USDL, Opportunistic Credit, Commercial Finance, Secondaries, Infrastructure), increasing potential for allocation conflicts; ARCC discloses significant potential conflicts in risk factors (referenced in proxy).
- Non‑disclosure of Ares‑sourced compensation amounts in ARCC proxy limits external evaluation of overall pay incentives at the individual level.
Overall investor confidence impact: The independent‑only committee framework, strong attendance, ownership alignment and prohibitions on hedging/pledging are positives; however, Smith’s multi‑hatting within Ares and status as an interested Co‑Chair warrant continued monitoring of related‑party governance controls, co‑investment reviews, and valuation oversight.