Overview of Fund Governance Practices Report

The Investment Company Institute and the Independent Director Council recently released a report on common fund governance practices covering the period from 1994 through 2020. Among the many findings in the report:

• More than two-thirds of fund complexes report having an independent chair. Sixty‑eight percent of complexes reported having boards with independent chairs at year‑end 2020.
• Boards are increasingly focused on independent director diversity. There has been a steady increase in the percentage of female fund independent directors, from 20 percent in 2012 to 32 percent in 2020. The increase in the percentage of minority independent directors has been material, but at a slower pace. In 2015, the first year in which race/ ethnicity data were collected, the percentage of independent directors identified as a racial/ethnic minority was 8 percent. In 2020, that figure was 12 percent. More recent cohorts of independent directors joining fund boards tend to have increasing percentages of female and minority directors.
• Most complexes have mandatory retirement policies. At year-end 2020, 73 percent of complexes have an age-based mandatory retirement policy, 6 percent of complexes have a mandatory retirement policy that entails both a mandatory retirement age and a limit on the number of years a director may serve, and less than 1 percent of complexes limit the number of years a director may serve. For those complexes with an age-based mandatory retirement policy, the average mandatory retirement age is 76. For complexes with a limit on the number of years a director may serve, the average limit is 16 years.