An independent chairman for mutual funds?

As the SEC winds up its debate about whether to impose new regulations requiring independent directors for mutual funds, questions remain. In 2004, the Commission passed a rule requiring an independent chairman and a board that consisted of at least 75% independent directors. According to the Wall Street Journal, Morningstar -- the fund expert's fund expert -- had this to say: "The effectiveness of many boards is compromised ... as long as those conflicts exist, shareholders are not being served as well as possible."

But from an investor's perspective, I wonder if the lack of independence in the directors of funds is really a problem. Does this lead to poor performance? Or is that caused by excessive trading, high expense ratios, and increasingly efficient markets making superior stock selection more difficult. I don't have an opinion on whether new rules should be written about this issue, but I will make one prediction: the SEC can require 100% independent boards and letters of recommendation from the Pope, Johnny Damon and Burt Reynolds for chairmen; but passively managed index funds will still be the best mutual funds for investors.