Dan Dolan, the architect behind the Select Sector SPDRs, is breaking his silence on what he considers the fund industry's most pressing issue: governance reform. After more than two decades building the ETF family to $350 billion in assets before retiring earlier this year, Dolan is now free to speak candidly. He argues that the current proxy system is broken, costing investors hundreds of millions of dollars annually, and that the industry's explosive growth to over $40 trillion in assets makes reform urgent.
The timing of Dolan's public comments follows a March 2026 report from the Investment Company Institute (ICI), which found that fund companies spent between $675 million and $1.14 billion on proxy campaigns over the past five years. Those costs, Dolan notes, are ultimately borne by shareholders. The ICI has called on the Securities and Exchange Commission to modernize the proxy system, and Dolan is adding his voice to that push.
Dolan points to the Statement of Additional Information (SAI), a disclosure document available on fund company websites, as a key resource for advisors. He identifies several red flags: long-tenured board members who may develop cozy relationships with fund advisors, former advisor employees serving as independent directors, and directors who do not personally own shares in the funds they oversee. Compensation levels also warrant scrutiny, with some independent directors earning $400,000 per year. “How likely is anyone to challenge the status quo if they are being paid $400,000 per year?” Dolan asks.
On director tenure, Dolan advocates for term limits of five or six years. “Imposing term limits would encourage healthier working environments, bring fresh thinking into the boardroom, and reduce the potential for conflicts of interest,” he says. He acknowledges that the industry has resisted change because it serves the interests of advisors and board members, not shareholders.
Dolan is also critical of the broader proxy solicitation process, which he says funnels millions of dollars away from investor returns each year. “The proxy solicitation firms are the only clear benefactors of the current system,” he argues. He supports a modernized framework that would give boards authority to handle routine matters internally, bypassing costly solicitation. “Let them vote on issues like appointing new directors and start saving investors millions of dollars each year,” he says.
The governance debate comes at a time when the fund industry has already driven historic fee compression. Dolan notes that every basis point cut saves investors $4 billion per year, given the $40 trillion asset base. But he warns that poor governance is now a brake on further progress. “Poor governance is not taking value back per se but it is inhibiting us from making additional progress to reduce expenses,” he says.
For advisors seeking to screen funds for stronger governance, Dolan acknowledges that no automated tool exists. His advice is to manually review the SAI for warning signs. “High comfort levels are the enemy of good governance,” he says. The process is manual, but it remains the clearest starting point available.
Dolan's call for reform echoes broader trends in wealth management, where governance is increasingly seen as a competitive advantage. As family offices and institutional investors demand greater transparency, the pressure on fund boards to align with shareholder interests is likely to intensify.
