Nominating Committee
The Fund Director Search Process - October 2012 Print E-mail
Written by C. Meyrick Payne and Sara D. Yerkey, partners at Management Practice Inc.   

      In the past two years Management Practice has successfully filled five fund director positions. We have found that the secret to starting a successful fund trustee search is to listen very carefully to the existing board members. A proven process in its simplest form appears in the graphic below.

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The Search for New Fund Directors - November 2008 Print E-mail
Written by Jay Keeshan and C. Meyrick Payne   

 MPI’s last bulletin discussed the effectiveness of mutual funds and their governance model during the recent economic upheaval.  It stressed the importance of mutual fund boards as well as the prospect of their getting more attention as a new financial regulatory structure is laid out.  While much is still to be determined, it is likely that there will continue to be a need for highly qualified individuals to serve as independent directors to help oversee America’s mutual funds, exchange traded funds, and potentially even hedge funds.

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Age, Term or No Limits From the Fund Director's Point of View Print E-mail
Written by Gordon Greer, Director of the Strong Funds   

(Gordon Greer is also a former '40 Act Lawyer, former Counsel to the Independent Directors and former Lecturer on Mutual Fund Law and Governance Practice at Boston University)

In the March 2003 issue of the Management Practice Bulletin, Meyrick Payne makes the case for considering either mandatory retirement ages or term limits for independent investors serving on the boards of mutual funds. I certainly agree that these are matters that should be considered. He points out the advantages of those limits and some disadvantages as well. Again I have no issues with that. I should, however, like to suggest some factors in addition to the ones Meyrick lists that ought to be included in the decision-making process.

While most mutual fund groups hold only from four to six meetings of the whole board each year, meetings of large fund groups can last for two or even three days. There will probably be some additional committee meetings outside of the board meetings. Efforts to produce regional diversity on boards cause there to be significant travel time for most trustees. In addition, the volume of material that the trustees must review and absorb between meetings is very substantial. The result of all of this is that trustees, particularly the 700 who are on the boards of those fund groups which manage 80% of the total fund assets, must spend a great deal of time on their jobs. Meyrick points out, certainly correctly, that they are fairly compensated for their work.

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Expertise and Experience: Criteria for a New Fund Director Print E-mail
Written by C. Meyrick Payne, Senior Partner of Management Practice Inc. (MPI),   

Management Practice Inc. (MPI) are consultants to the Independent Directors of Mutual Funds. The important selection criteria are underlined for convenience.

In the course of a year about 100 new fund directors are appointed by the existing trustees or elected by the fund shareholders. The SEC has made it quite clear that nomination and selection is a matter for the existing independent directors, although the manager, like anyone else, might suggest candidates. In either case, setting the criteria for a candidate is an important part of the process. Our firm, MPI, has helped many Nominating Committees with this process. This Bulletin highlights some of the major findings from our work.

When establishing new director criteria, the most important step is to think clearly about what personal characteristics, skills and expertise is likely to be needed for the next five to ten years. A mutual fund director, like a federal judge, is a long term appointment (perhaps as much as 20 years) and there are precious few ways to undo the appointment if a poor choice is initially made.

 

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Age, Term or No Limits for Mutual Fund Trustees Print E-mail
Written by C. Meyrick Payne   

Being a mutual fund director is a uniquely influential position and it can be quite rewarding - both monetarily and psychologically. Once someone has become one, especially of a large fund complex, there are few mechanisms by which he or she can be displaced. The purpose of this MPI Bulletin is to explore the advantages and disadvantages of age, term or no limits on the length of service.

There are about 3,000 independent mutual fund trustees in the United States today overseeing about $7 trillion in mutual fund assets. Compare that statistic with 600,000 doctors and 800,000 lawyers and 700,000 CPAs. And of those, about 700 oversee 80% of all fund assets. Undeniably fund trustees are influential and perhaps even pivotal in the savings and investment process in America today.

The compensation of fund directors pales in comparison to the salaries of portfolio managers and investment managers, whom they are paid to oversee. Nonetheless some fund directors meet only four times per year; with the substantial time required to prepare and discuss topics among themselves and with expert advisors prior to the Board or Committee meetings, their compensation can still average over $500 per hour. While this is no more than the rates charged by the top í40 Act lawyers and accountants, it is a tidy sum to receive personally.

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