Morningstar has published commentary urging the Securities and Exchange Commission not to back down on its independent chairman rule.

"It's a step, however small, toward putting fund shareholders on equal footing with fund-company stakeholders and ensuring that boards serve as fiduciaries of the boards they hire [and overcome] an inherent conflict of interest," the fund research company maintains. "Clearly, fund shops know that the chairperson sets the tone for the most important issues before the board, and that's why we're fighting so hard to retain the status quo."

Too often, Morningstar says, fund companies "gun for profitability," keep mediocre managers on staff and allow an affiliate to handle fund administration when a third party could do the same job for less. In sum, many affiliated directors accept "nice paychecks" to stay in management's "back pocket," according to Morningstar.

Of course, simply installing an independent director and upping the presence of independent directors from 50% to 75% would eradicate all of these abuses, but it will force boards to focus on shareholders, the company says.

As to the argument that affiliated directors can do a better job of running a fund than outsiders and help boost fund performance, Morningstar notes that independents will probably continue to heed the recommendations of affiliated directors.

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