Fund board performance evaluation
Authors: Booth, R. and Nordberg, D.
Publisher: IFI Global
[Pre-publication text of an article for the June 2019 edition of NED Global: Risk and Governance (IFI Global publishers, www.nedglobal.com]
The world of boards of investment funds – like that of corporations in general – has come under increasing scrutiny. These entities are constituted as companies in law, but their boards of directors have traditionally had only a helicopter view of the landscape. Making them better – getting them to contribute more to fund governance – may require us to look at these boards even more closely, and to employ the tools being development to evaluate corporate board performance. In the early 1990s, as the Cadbury Code brought the term corporate governance into the vocabulary of business, board performance was associated mainly with board structure: independent chairman, non-executive directors, and committees that brought the most sensitive recommendations into the hands of outsiders. Those changes led to corporate boards and worked harder and were in a better position to monitor the chief executive and senior management. But they didn’t stop catastrophic failure from occurring.
In the wake of the debacle of Enron, WorldCom and so many others, US regulation pointed a similar spotlight on fund governance, demanding over protests from the industry that mutual funds have chairs independent of the fund company management. ...