From: William Patton
SEC Chairman Christopher Cox
Dear SEC Chairman Cox,
Mutual funds are an important savings vehicle for tens of millions of working Americans like me.
The concept of the mutual fund is to increase the purchasing power of the individual investor by pooling funds, thereby limiting risk through enhanced diversification. That protection is diluted when the management structures of the fund and the companies in the fund's portfolio become so similar as to be indistinguishable. As owners of these funds, we bear the risks if they are dominated by self-interested insiders. We look to the Securities and Exchange Commission (SEC) to protect us.
I am writing to express my strong support for the proposed rule requiring that mutual fund boards have an independent chairperson and at least 75 percent independent directors. These rules were among the most important reforms adopted by the SEC in the wake of the mutual fund trading and sales abuse scandals.
A recent study by AFSCME and The Corporate Library found mutual funds provide a rubber stamp for excessive management pay, supporting more than three-quarters of all management pay proposals. Ninety percent of institutional investors think the current system overpays executives.
Independent directors are neccesary to assure that money managers consider excessive executive compensation as a negative factor when evaluating companies for inclusion in their portfolios.
The Investment Company Act requires that mutual funds be managed in the interests of their shareholders. Requiring independent directors and chairpersons will help safeguard the small investor, ensuring their continued participation in the market.