The Right -- and Wrong -- Steps to Reform the Fund Industry

If something should be added to regular fund reports, it's more information about the fees. And thankfully, the SEC is pushing for that.

Useful: Making Fund Boards More Accountable

Billionaire and investor extraordinaire Warren Buffett had some choice words for mutual fund directors in his annual missive out of Omaha. "These directors and the entire board have many perfunctory duties, but in actuality have only two important responsibilities: obtaining the best possible investment manager and negotiating with that manager for the lowest possible fee," Buffett writes in his annual letter to Berkshire Hathaway(BRK.A Quote) shareholders. "Yet when it comes to independent directors pursuing either goal, their record has been absolutely pathetic."

He's right. But where's he been? Fund boards have always ruled with a rubber stamp. They rarely change a fund's advisor or close a fund. That's no different today than it was during the nineties.

People always say that shareholders could simply vote with their feet and dump a fund if they didn't like what they got. But today more investors are locked into fund choices through 401(k) plans and could use someone looking out for their best interests.

If Buffett can actually goad independent directors into being more responsible, then more power to him.

Here's another idea: The directors' names, addresses and occupations are already included in a fund's statement of additional information, which you have to request from the fund company. If fund firms would just print this information in every semiannual report -- along with each director's photo and home phone number -- then those boards might start behaving a little more responsibly.