- More than 100 directors share insights on demands, personal satisfaction
resulting from current regulatory environment -
WILMINGTON, Del., Nov. 8 /PRNewswire/ -- While the mutual fund industry
has witnessed considerable regulatory change since 2003 to protect
shareholders through increased oversight and transparency, little attention
has been given to the impact of the regulatory changes on those individuals
who serve on the boards of directors for fund companies. In fact, an
evolution has occurred around the board table where the players have
changed and the stakes are higher, according to a landmark study that
provides rare insight into the minds of 154 independent board members,
affiliated board members and fund executives released today by PFPC.
In response to increased demands, one-third of directors surveyed
report spending more than 50 hours per quarter (200 hours per year) on
board responsibilities, and turnover is relatively high. One in four
respondents noted at least one member of their board had resigned as a
result of the additional time spent due to increased regulatory burden or
personal liability concerns. Although 65 percent of directors surveyed
believe the job is more difficult today, an overwhelming majority (96
percent) report enjoying their time as directors and plan to continue to
serve.
LOOKING FOR A FEW GOOD PEOPLE
Four out of 10 board members report that their boards have increased
the number of directors given the burden of new regulations or need for
additional expertise in a particular area.
"Fund boards are getting larger out of necessity in response to the
reforms introduced by Sarbanes-Oxley -- greater transparency and
accountability -- and the increased compliance and controls that came out
of SEC Rule 38a-1. Both have significantly increased the workload for fund
directors," said Linda Hoard, senior vice president and senior counsel at
PFPC. "For example, Sarbanes Oxley requires funds to disclose whether or
not their audit committee has a financial expert. Rather than disclose that
they did not have a current member who met the criteria of a financial
expert, many fund boards went out and recruited from a limited talent
pool."
Recruiting qualified candidates to serve as audit committee financial
experts has been difficult or very difficult, according to 58 percent of
directors surveyed. Equally challenging is recruitment of independent board
members which 51 percent of respondents also identified as difficult or
very difficult.
This influx of new directors has resulted in more than fresh faces
around the board table. The PFPC study indicates the new boards have
distinct characteristics, including:
Professional Expertise - Majority of all board members surveyed have
backgrounds in financial services (56 percent) and corporate management
(21 percent); independent directors bring diverse expertise from legal (12
percent), accounting (7 percent) and academic (9 percent) backgrounds.
Gender - Remains a challenge with male directors comprising three quarters
of the board members surveyed; only one out of five respondents was a
woman.
Age - 95 percent of interested board members surveyed are under the age of
65; nearly one-third (32 percent) of independent members are 65 or older.
One third (34 percent) of directors recruited in the past five years are
under the age 45. However, only 5 percent of those on the board for more
than five years are under the age of 45.
LEVEL OF DIFFICULTY
Two-thirds of all board members surveyed (67 percent) and
three-quarters of independent board members believe it is more difficult to
be a mutual fund director today. Tenure impacted the responses. The more
experienced directors, those serving 16 or more years, are more inclined
than those with five years or less to feel the role today is more difficult
(85 percent compared to 59 percent).
"The increased regulatory environment, combined with greater
expectations among shareholders and rapid growth in the industry in
general, have all contributed to the increased burden on directors," said
Hoard.
Liability anxiety is a concern for board members, with one in four
board respondents noting concern that he/she does not have adequate
personal liability insurance. One-third (36 percent) of interested board
members and 16 percent of independent directors surveyed have obtained
additional personal liability coverage.
SHAREHOLDERS AND DIRECTORS BENEFIT
While there is little consistency in what motivated directors to serve
as board members, there is little doubt about their personal satisfaction,
at 96 percent, and their commitment to continuing in that role.
Most importantly, seven out of 10 directors (71 percent) agreed or
strongly agreed that investors have benefited from increased disclosure,
and three quarters of directors (77 percent) agreed that shareholders have
gained greater confidence in the fund industry.
SURVEY METHODOLOGY
The PFPC Mutual Fund Board Study was conducted by the independent
research firm Artemis Strategy Group, headquartered in Washington, D.C. The
study was based on 154 telephone interviews conducted with 57 independent
board members, 44 interested board members and 53 fund executives,
including presidents, chief compliance officers, chief executive officers
and chief financial officers. The study was completed in July 2007.
PFPC, a member of The PNC Financial Services Group, Inc. (NYSE: PNC),
is a leading provider of processing, technology and business solutions to
the global investment industry. PFPC offers subaccounting, transfer agency,
managed account, alternative investment, fund accounting, administration
and custody services, representing over $2.5 trillion in total assets.
Visit us at http://www.pfpc.com.
SOURCE PFPC
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Related links:
http://www.pfpc.com
http://www.prnewswire.com/comp/701257.html /
CONTACT:
Amy Vargo of PNC, +1-412-762-1535,
amy.vargo@pnc.com, or Rob Tacey of PFPC, +1-302-791-2859,
robert.tacey@pfpc.com
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