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Written by C. Meyrick Payne based on comments submitted to the SEC
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Management Practice Inc. (MPI), a professional consulting firm specializing in
mutual fund governance and the publisher of 15 consecutive years of independent third party research into mutual fund director compensation, would like to highlight several facts about the proposed Independent Chairman rule.
Cost of Independent Chairs
On average the annual additional cost of compensating an Independent Chair is approximately $30,000. There are about 500 fund complexes which would be required toappoint an Independent Chair. Therefore the incremental cost would be approximately $15 million, a miniscule percentage of both the $70 billion in total mutual fund fees and the $9.5 trillion in mutual fund assets. While the Independent Chair may choose to increase the use of consultants, staff, and analytical resources, the incremental cost should not be attributed to the proposed rule, but rather to other new or pre-existing regulations or legislation, such as Sarbanes-Oxley. |
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Written by C. Meyrick Payne
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For the second year in a row, the increase in fund director compensation was
driven more by the number of meetings than by the retainer. After a robust increase of
8% in the first half of 2004, the pace of pay raises for independent mutual fund
trustees/directors slackened slightly in the second half but still wound up the year with an
annual increase of approximately 13%. This second full year of Sarbanes-Oxley impact,
along with continued fund regulatory reform, saw a continued increase in the
responsibilities of evermore influential fund directors, resulting in a two-year (’03-’04)
compensation gain of 27%.
Directors are finding the job requires more and more time to stay on top of
governance issues. The increase in total compensation is 72% attributable to additional
meetings and more paid committee work. Only 28% of the increase is attributable to
increased board retainer. The median number of board meetings has risen from just under
5 in 2003 to nearly 6 in 2004 reflecting the increased complexity and time consuming
nature of board work. The typical board meeting lasts 6 or more hours, with many board
meetings spanning 2 days. |
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