The first survey ranking fund boards' effectiveness needs to adjust its methodology before it is conducted for a second time this autumn, according to the survey's author.

"I'm the last guy on the earth to say that I've got everything figured out," said Tim Schlindwein, the author and principal of Schlindwein Associates, a consulting firm in Chicago. "There is always room for improvement and we've told everyone that. As we sent copies of the survey to fund companies, we asked everyone to give us their feedback and we are indeed compiling a list of potential improvements and enhancements for the new version."

The survey, which was released last autumn, ranked 138 fund boards based on two criteria: board structure and investment performance. Board structure examined composition and compensation of board members. Higher values were awarded to boards with a greater number of independent members and lower compensation rates.

Investment performance scores were based on funds' investment consistency and risk of investment strategy relative to return and expense.

The survey's methodology will undergo adjustments, Schlindwein said. Specifically, the criteria that assigns higher scores to boards with lower salaries will be changed, he said.

"To serve shareholders well, your fund board should be paid reasonably well and those that aren't are probably equally suspect as those that are paid lavishly," Schlindwein said.

Compensation played too great a role in the survey, he said.

How changes to the fund board compensation criteria will be implemented has not been determined, Schlindwein said. Additional changes are being considered based on fund companies' suggestions but Schlindwein declined to comment on what those changes might be.

Still, the survey ranks boards on several important factors, said Jerry Dillenburg, vice president and operations manager for Alleghany Funds of Chicago.

"I think it was an unenviable task to try to quantify an endless number of factors," he said. "I think the survey should be taken with an understanding of the criteria that is being used."

Alleghany Funds finished second overall in the rankings.

The survey acknowledges that it cannot measure important factors like board meeting content and frequency because they are too difficult to measure.

But the survey needs more than just a little tweaking, according to Ed Rosenbaum, vice president and director of research for Lipper of Summit, N.J. The survey attempts to evaluate criteria that are extremely difficult to quantify, he said.

"Anyone who has sat through a fund board meeting understands independence comes in a variety of flavors," he said. "If I was the professor, I would tell the student it was an interesting first try, but to go back and do it over."

Fund company reactions to the survey varied depending on the fund companies' rankings, Schlindwein said.

Jack Thompson, president and CEO of Berger Funds of Denver, which finished second to last of the 138 fund groups ranked, called the rankings "worthless." The survey fails to evaluate the most important criteria when evaluating a board such as how often a board meets, what it discusses and its ability to negotiate, he said.

Despite some criticism, the survey will be issued again this year for free but Schlindwein may offer fund companies a more comprehensive report for a fee.

"I think there's a good chance that we'll have something more concrete when we release the study this year," he said. "Some of the feedback that we have been getting from folks is that maybe there is some value to be added in providing a more detailed survey."

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