Industry Resists New Call for Truly Independent Directors

Published June 25, 2003, 1:00 a.m. EDT

Updated June 25, 2003, 1:00 a.m. EDT

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A proposal in the new fund disclosure bill that would preclude anyone with business or personal ties to a fund company from serving as an independent member of the board has many in the fund industry hotly contesting the idea, Reuters reports.

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Paul Haaga, chairman of the Investment Company Institute, testified before Congress last week that while such people might be viewed as "valuable board members because of their extensive knowledge of the industry, [the ICI] has concluded that their prior service may affect the directors independence, both in fact and appearance." Haaga made the statement as the House Subcommittee on Financial Markets considered the Mutual Funds Integrity and Fee Transparency Act.

But many fund companies allow previous executives to serve as independent directors, and they defended this practice when reached by Reuters. "The board concluded that, surely, at some point in time, a person who used to be affiliated with management could be legally and factually independent, Prudential Financial said in a statement. Meyrick Payne, a senior partner with Management Practice, said it would serve a fund well to have people on the board who understand the workings of the fund.

The staff of Money Management Executive ("MME") has prepared this capsule summary based on the report published by the news source to which it is attributed. Reuters is not associated with MME, and has not prepared, sponsored, endorsed, or approved this summary.