Just like many corporate boards, mutual fund boards have an opportunity to strengthen their operations, and solve some of the challenges they face, by more effectively thinking about the value of diversity. By seating professionals from a wide variety of professional and cultural backgrounds, mutual fund boards can add significant value, enhance oversight, and benefit from the value of differing perspectives and ideas.
Admittedly, to achieve the best in diversity, mutual fund boards should strive to find the best person for the seat, so diversity should be just one of many factors for successful candidacy. But it should be one of the primary factors. Certainly, it doesn't make sense to screen out an exceptional candidate because it doesn't help with diversity, but it doesn't make sense to use the lack of diversity as an excuse to stay with the status quo. Because mutual fund boards are charged with overseeing both the operations and the funds from a shareholder perspective, it only makes sense to have the board mirror the many faces of the shareholders it represents.
Diversity includes gender and race, to be sure. But the potential board candidate should embody a deep business background, as well, one that belies the experience and varied corporate acumen that would be considered an asset to the organization. Remember that a diversity of backgrounds brings a diversity of thought. This kind of contrasting business perspective can add real value to a board and help in achieving what other board members are trying to accomplish.
Locating such a candidate can be as easy as looking to the board's professional network. Most of us have a diverse collection of friends and professional associates that make our lives just a little more interesting. Taking that same approach to filling board seats can provide the same rich experience. So when looking for qualified candidates, look beyond your normal, close-knit relationships and take a wider professional view in working towards diversity. If board members think deeply about their wide circle of professional contacts, the chances are good that the next candidate resides in that pool. But to get there, you have to make the effort to expand and scour your network for the uniquely qualified person that may be the perfect match.
Keep in mind also those new board members, no matter what their culture or background, should all undergo a real orientation to the mutual fund world, and a specific orientation to your particular fund family. Don't assume that just because the candidate has a deep business background that they will eventually catch on to the board's goals, challenges, and priorities. So provide formal orientation for new board members. Help them meet the other players on the board and get acclimated to their new environment. Show them specifically how the board operates.
And give them time to interact formally and informally with other board members. Try to have members meet outside the board setting in a more casual and friendly environment, so they won't feel like an outsider for very long. Don't treat them as something other than what they are: a new board member with fiduciary responsibilities. Allow them their opinions, reflections, and disagreements. This kind of healthy interaction can lead to real breakthroughs in board management and direction.
Whether replacing or adding a board member, take the opportunity to seat someone that is more reflective of today's business environment. The right mixture of unique cultural, gender, and business backgrounds can take a comfortable board and add a much-needed spark. This kind of divergent thinking can also lead to better ideas, more excitement, and the possibility of traveling down more creative paths. Finally, making a conscious decision to include greater member diversity can make a board more effective, more competitive, and certainly more engaging.
Jeff Young is Senior Vice President, Relationship Management for Huntington Asset Services. He oversees all client relationships, product strategy and board governance services. He also serves as a President and Principal Executive Officer for multiple fund complexes, as well as Chairman of the Board of the Valued Advisers Trust.