Average Joe on a Fund Board?
I'm an average investor with less than $25,000 in any given mutual fund. Once again I'm being asked to elect a fund's board of directors. I've never met these people, and they haven't told me how they would represent me as a shareholder. So I'm wondering how I can serve on the board. I probably know the average investor better than they do.
It's no easy feat for the average Joe to land a seat on a fund's board of directors. Much depends on who you know. "If you have the background and knowledge of the industry, and you can bring something to the table, of course you can serve on the board," says Neil Hennessy , president and portfolio manager of Hennessy funds. "But I've been in this industry for 28 years, and nobody's ever asked me to be on a board of directors."
Hennessy's board includes a retired executive from the American Automobile Association and the sheriff of Marin County, Cal. "The sheriff has several hundred people under him and manages a budget," says Hennessy. "You don't get into such a leadership position without honesty and ethics."
By law, the majority of a fund's directors must be independent, with no official connection to the management company. Remaining board members may be, and often are, insiders from the management company.
Virtually all fund boards have a nominating committee to which you can send a résumé, says Bob Dorsey, of Ultimus Fund Solutions, which provides services for small and midsize funds. "Take a look at the current composition of the board and write a letter explaining your own qualifications," says Dorsey.
Directors are in charge of hiring (and firing) fund managers, setting fees and watching out for shareholders' interests. It makes sense that they should have expertise in financial services and "be up to speed on things like corporate governance and Sarbanes-Oxley," says Nell Minow, co-founder of the Corporate Library, which focuses on governance issues. "That's more important than understanding what it's like to be an investor."
As an investor, you can still influence your fund's business operations by attending shareholder meetings or voting for board members by proxy.
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