Every fund board, regardless of its size or structure, confronts issues relating to its composition. Fund boards are not static; they change as directors depart and new ones join. The composition of a fund board—in terms of size, the proportion of directors who are independent, the demographics of the directors themselves, and more—varies widely by fund complex.
In 2004, the U.S. Securities and Exchange Commission adopted fund governance standards requiring, among other things, that at least 75 percent of a fund board’s directors be independent. This requirement was challenged in a court proceeding and never came into effect. Nevertheless, most fund boards have adopted this practice. Today, 86 percent of fund boards are made up of at least 75 percent independent directors.