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Mutual Fund Board of Directors Composition

The announcement of the many mutual fund scandals has left the mutual fund board of directors under the close and critical scrutiny of the public. This is done, since the members of the board of directors of each mutual fund are supposed to guard the interests of the shareholders, who are the real owners of every mutual fund company.

Mutual Fund Board of Directors' Structure

The typical board of directors consists of a fund company CEO, which may be classified as one of the most important positions in every mutual fund. Additionally, upper management facilitates the work of the CEO, who also receives work support from his/her friends. Another very important component of the mutual fund board of directors is the local business owners and celebrities.

As it can be seen, the mere composition of the mutual fund board of directors predisposes for the misuse of the assigned responsibilities. This has also been realized by the Securities Exchange Commission (SEC), which in order to prevent potential abuses, has passed the requirement for the participation of outsiders. This has led to the mutual fund companies searching for outsiders, who don't have any connections with the activities of the company.

Alternative Board Members

Many mutual fund companies have started to include university professors as members of their boards. As a whole, this idea is quite good, but lacks in its practicability in this that university professors don't have enough time to get in depth of the activities and peculiarities of the mutual fund. This is due to the fact that they have to allocate enough time for their lectures, whereas the dynamics of the mutual fund field requires constant watch on the current trends.

Investor advocates represent an appropriate option for members of mutual funds. Such advocates include journalists, mutual fund writers, regulators and etc. These people should radiate trustworthiness and possess the adequate experience in order to successfully and efficiently execute their responsibilities in guarding shareholders' interests. Another requirement that potential outside members of the board of directors should meet is the thorough grasp of the rules of the law under which mutual fund companies function.

These new requirements should not be received by the mutual fund companies as an obstacle that aims to hinder their work. Instead, they should view it as another opportunity to further strengthen the trust of the shareholders in the proper functioning of the mutual fund company.

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