From: Dawn-Marie Driscoll
To the Commissioners, with regard to the Mutual Fund Directors Independence Rule S7-03-04
I am the independent chairman of the New York DWS Scudder Funds board. Our board of twelve independent trustees and one interested trustee oversees more than $75 billion in assets in all categories and across approximately 70 funds. My comments on the proposed rule with regard to director independence, mandating a 75% ratio of independent trustees and an independent chair, are my personal opinions only and do not necessarily reflect the views of other trustees or of DWS.
I have been a fund director since 1987. Since prior to that time, our predecessor board has always had a "lead director" who acted to coordinate the responsibilities of the independent directors and communicate with management, as well as run the board meetings in executive session and preview agendas and board materials.
I have had the privilege of serving on the board of governors of the Investment Company Institute and served as chair of the Directors Services Committee of the ICI, and later as chair of the Independent Directors Council. In 1999 the SEC explored the responsibilities of fund directors at a two-day Roundtable, at which panels of experts spoke about possible improvements to the existing governance structure. Shortly thereafter the ICI convened an Advisory Group on Best Practices for Fund Directors, on which I served with two other independent directors and three interested directors. The result of our work, our report called Enhancing a Culture of Independence and Effectiveness, was issued in June of 1999 and contained fifteen recommendations, two of which are relevant to your inquiry.
Our first recommendation was that at least two-thirds of the directors of investment companies be independent. Your proposal now mandates 75%. I agree with that proposal and believe that if there are any boards that are not now at 75%, mandating it will ensure that it happens. There will be no cost to our board as we are already at 92%. I have no knowledge of the cost to other boards except to note that presumably an interested director could resign if needed to bring the percentage to 75%.
With regard to your second recommendation, the requirement of an independent chair, while our board has chosen an independent chair I do not believe that it should be mandated. In the 1999 Best Practices report we recommended that independent directors designate a "lead" director. It is possible to have an effective lead director as well as an interested chairman, if that is what the board chooses to do. Each board and each adviser is different. If the independent directors constitute a supermajority of the board, they have the votes to decide which form of leadership is best for their board. The SEC has trusted independent directors to assume a wide range of serious and complex responsibilities for shareholders, including serving as their "watchdogs." To suggest that independent directors cannot or will not consider seriously their own governance structure, and therefore that an independent chairman position must be mandated, makes little sense.
Finally, you asked about extra costs for an independent chairman. We pay our independent chairman a modest additional stipend for the extra work required. This is not an extra cost because we have historically paid our lead director an additional stipend. As independent chairman I do not have my own staff, nor has the board required any additional legal counsel, staff or consultants because of the fact that we have an independent chair.
I hope these comments have been helpful.