Corporate Governance at Mutual Funds

Charles Schwab's YieldPlus bond fund was one of many bond funds that tanked in 2008. One thing that makes this unusual is that fund managers claimed that the average maturity of the fund's holdings was about six months when in actuality it was as high as 2.2 years. A mutual fund's Board of Trustees is designed to protect fund investors, similar to the Board of Director's role as shareholder protector in a corporation, yet some people argue that most mutual fund's Board of Trustees are relatively passive and do little to protect investors. One potential problem raised is that individuals will often sit on multiple mutual fund boards. For example, Fergus Reid III, serves as chairman for all 154 J.P. Morgan mutual funds, while simultaneously serving on the board of 105 Morgan Stanley mutual funds. A telling statement of the apparent lack of power held by a Board of Trustees is evident in the statement by mutual fund manager Donald Yacktman, who said "I've never changed my fees because of pressure from the board." http://www.smartmoney.com/invest/mutual-funds/why-mutual-fund-guardians-are-failing-1339088682278/#tabs