Governance extends to funds, says panel

Pension, endowment and charitable funds should toughen their governance to curb mismanagement and abuses of fund assets, according to recommendations issued today by a committee of the Stanford Institutional Investors’ Forum at Stanford Law School.

“Funds should 1) clearly define and make publicly available their governance rules; 2) mandate tough and transparent policies to address conflicts of interest; 3) take steps to ensure funds have trustees who are competent in financial and accounting matters; 4) establish clear reporting authority between trustees and staff; and 5) define appropriate responsibilities and delegation of duties among fund trustees, staff and outside consultants, according to a statement from Stanford. The 31-page report is available at www.law.stanford.edu/clapmanreport.

“What we don't want is a future Sarbanes-Oxley for investment funds,” Peter Clapman, chairman of the committee, said in the statement. Mr. Clapman is also CEO of Governance for Owners USA, a shareholder activist advisory firm.

The study “should be a welcome addition to the emerging body of literature on crafting good business models for public employee retirement systems,” Gary W. Findlay, executive director of the $7.6 billion Missouri State Employees’ Retirement System, Jefferson City, said. “Reinforcement from a credible academic source will likely be embraced by those in the industry who are attempting to professionalize their operations.” Mr. Findlay was not involved in the study.