1. Mutual Fund Boards vs. Corporate Boards
Patricia M. Flynn, PhD
Trustee Professor of Economics & Management
Bentley University
“Seat at the Table”
Board Options
October 26, 2017

2. I. CORPORATE BOARDS Director Characteristics (S&P500)
Average board size: 10.8
Average # of board meetings per year: 8.4
Average age of independent directors: 63 years
Average tenure on the board: 8.3 years
Retirement age: most (95%) at 72+.
% of new independent directors that are first-timers: 32% (all-time high.)
% of independent directors that are female: 21%
% of new independent directors that are female: 30%
% of independent directors that are minority: 15%
% of new independent directors that are minority: 15%
Source: Spencer Stuart 2016 Board Index

3. Board Committees Audit Committee* Compensation Committee*
Nominating/Governance Committee*
Executive Committee
Finance Committee
Risk Oversight/Crisis Management
Other
* Members all “independent” directors.

4. Characteristics of New Independent Directors (S&P 500)
Financial backgrounds % 24%
Div. Pres./line or functional head % %
Active CEOs/COOs/Pres % 29%
Retired CEOs/COOs/Pres % 11%
Academics/nonprofit % 8%
Consultants % 5%
Lawyers % 2%
Others* % %
*Mostly retired government and military officials, plus a few other retired executives.
Source: Spencer Stuart 2016 Board Index

5. “Wish List” for New Director Backgrounds, 2016 (S&P 500)
Active CEO/COO 63% Retired CEO/COO 58% Financial expertise 55% International expertise 55% Technology expertise 44% Industry expertise 37% Digital or social media expertise 21% Marketing expertise 19% Regulatory/Gov’t experience 19% Minorities 55% Women 64 Source: Spencer Stuart 2016 Board Index

6. Public Company Director Compensation (2016)
Size* Avg.Total Comp. ** % Cash
Micro $ 120, %
Small , %
Medium , %
Large , %
Top , %
All Firms , %
*Micro($50-499mil); Small($ mil); Medium ($1bil - 2.4bil); Large($2.5 bil – 9.9 bil) Top 200 ($10 bil. +) largest U.S. industrial and service corps
** Includes all compensation, i.e., board cash retainer, meeting fees, committee pay, stock and stock options.
Source: NACD Director Compensation Report.

7. II. MUTUAL FUND (MF) BOARDS
Approximately 2,000 fund directors (trustees) oversee about 9,000 funds with over $16 trillion assets under management (AUM).
The largest 10 complexes account for about 2/3s of the AUM. (2016)
Black Rock, Vanguard, State Street Global Advisors, Fidelity, JP Morgan, BNY Mellon, PIMCO, Prudential Investments, American Funds, TIAA.

8. MF vs. Corporate Boards: Similarities
MF boards have a fiduciary responsibility to protect the interests of the shareholders.
Other similarities:
Executive sessions
Codes of ethics
Board self-evaluations
Hire outside experts

9. MF vs. Corporate Boards: Differences
The funds are not an operating company with employees in the traditional sense. A MF board is trustee of the funds, not the board of the fund’s advisor. The funds have no employees, and rely on the adviser to carry out the funds day-to-day operations.
MF boards can choose not to renew the contract of the Investment Advisory – not the CEO– but this is rare.
No required annual meeting of shareholders of open-ended funds. Meetings called for various required votes, e.g., fund mergers.
There are contracts and compliance committees, but no compensation committee.
While corporate boards focus on income statements, balance sheets, cash flow, CEO performance, executive comp. etc., MF boards focus on:
compliance with the Investment Company Act of 1940;
Investment advisory agreements (15C process).
Fund performance, fees, contracts
conflicts of interest between the Investment Adviser and shareholders;
risk.

10. Mutual Fund Board Trustee Characteristics
Management Practice study of 403 fund complexes and 1,902 trustees/directors.
Independent trustees: 85%
Independent trustee average age: 67 years
Independent trustees that are female: 20%
Incoming trustees that are female: 33%
Retirement age: Shifting to 75 years
Average tenure on the board: 12 years
Source: MFDF and Management Practice, Mutual Fund Director Compensation: The 2016 MP Annual Survey, May 17, 2016.

11. Mutual Fund Director Compensation, 2015
Assets under Management (AUM) Median Total Compensation < $ 1 bil. $ 10,000 $ 1bil. - $3 bil. $ 42,000 $ 3 bil. - $ 10 bil. $ 80,000 $ 10 bil. – $ 25 bil. $ 115,000 $ 25 bil - $50 bil. $ 208,125 $ 50 bil - $97 bil. $ 266,500 > $96 bil. $ 295,833 Source: MFDF & Management Practice, 2016.

12. III. GETTING THERE Discussion
How to get on a corporate board or mutual fund board.
Other topics/questions.

13. Resources
National Association of Corporate Directors (NACD). NACDonline.org
NACD Public Company Governance Survey
Directors Compensation Report (with Pearl Meyer)
Spencer Stuart Board Index, annually.
MFDF
Reports and webinars on a range of topics
Mutual fund candidate database
ICI (Investment Company Institute)
Investment Company Fact Book, annually
Understanding the Role of Mutual Fund Directors (no date)
IDC (Independent Directors Council)
Fundamentals for Newer Directors (no date)
Overview of Fund Governance Practices, (Oct. 2017) With IDC.
Robert Pozen & Theresa Hamacher, The Fund Industry: How Your Money is Managed, 2nd ed. John Wiley & Sons.