Alert October 06, 2009

ICI and IDC Issue Overview of Fund Governance Practices

The Investment Company Institute and the Independent Directors Council issued an updated overview of fund governance practices that looks at common fund governance practices during the period 1994-2008, based on data collected from participating fund complexes.  The overview provides statistics in the following areas, along with brief explanatory discussions:

  • Fund Total Net Assets and Total Independent Directors
  • Fund Net Assets Served by Independent Directors
  • Funds Served by Independent Directors
  • Board Structure - Unitary or Cluster Boards
  • Complexes with 75 Percent Independent Directors
  • Number of Independent Directors for each Complex
  • Frequency of Board Meetings
  • Board Meetings and Committee Meetings in which Independent Directors Participated
  • Independent Board Chair or Lead Director
  • Independent Director Fund Share Ownership
  • Independent Director Never Previously Employed by Fund Complex
  • Mandatory Retirement Policy (including average age and the length of service for Independent Directors)
  • Independent Counsel - Independent Director Use of Separate Counsel, Independent Director Reliance on Fund Counsel Different from Adviser’s Counsel and Same Counsel for Fund and Adviser with No Independent Counsel
  • Audit Committee Financial Expert
The overview highlights the following findings: (a) the number of complexes reporting that independent directors hold 75% or more of board seats has risen to 88%, (b) 63% of complexes reported having boards with independent chairs at year-end 2008, (c) independent directors at 96% of fund complexes were represented either by dedicated counsel or counsel separate from the adviser’s at year-end 2008, with more than half having counsel separate from both fund counsel and the adviser’s counsel, and (d) 97% of participating complexes reported that their boards’ audit committees had an audit committee financial expert.