Mutual fund boards maintain strong governance, survey says

Mutual fund boards maintain strong governance practices to safeguard shareholders’ interests, according to a new report by the Independent Directors Council (IDC) and Investment Company Institute (ICI).© Shutterstock The report – called the Overview of Fund Governance Practices, 1994–2018 – revealed several key findings. For example, it found that independent directors make up three-quarters of […]

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Mutual fund boards maintain strong governance practices to safeguard shareholders’ interests, according to a new report by the Independent Directors Council (IDC) and Investment Company Institute (ICI).

© Shutterstock

The report – called the Overview of Fund Governance Practices, 1994–2018 – revealed several key findings. For example, it found that independent directors make up three-quarters of boards in 84 percent of fund complexes – that’s up from 46 percent in 1996. Further, 66 percent of fund complexes have an independent board chair even though there is no legal requirement to have one. Also, 91 percent of participating complexes have an independent director in board leadership.

Also, most fund complexes have mandatory retirement policies for board members with the average age of compulsory retirement set at 75. For complexes that put term limits on directors, the average limit is 16 years. Finally, the survey said that 54 percent of independent directors are represented by dedicated legal counsel, while 41 percent are represented by legal counsel that is different from the adviser’s counsel.

“Boards set a high standard for fund oversight by continuing to adopt strong governance practices even when they aren’t required by regulation,” Amy Lancellotta, managing director of IDC, said. “Our report details these practices and how they have evolved to continue to serve investors’ best interests.”

The report, conducted every two years, is based on research from fund complexes representing nearly 9,000 funds.

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