THE YACKTMAN COMETH (AFTER HIS DIRECTORS)

When 1998 began, Donald A. Yacktman was a big-name mutual fund manager with a pair of funds whose performance was beginning to lag. By year’s end, the Yacktman name had become a symbol of bad relations between funds and their boards of directors.

Mr. Yacktman launched an unprecedented proxy campaign in September to replace the four independent directors on the boards of his namesake fund and the smaller Yacktman Focused Fund.

Mr. Yacktman won the shareholder vote last month, but the fracas – over his investment style and business practices – raised alarm bells in the halls of the Securities and Exchange Commission, which has been prodding fund trustees to become tougher watchdogs.

Lawyers representing outside fund directors worry now that board members, often criticized as rubber stamps for the managers they’re supposed to oversee, will be even less willing to take them on.

Still, the Yacktman affair shined a brighter spotlight on the workings of mutual-fund boards than any of the industry’s handful of past conflicts. Some now wonder if it will prompt the SEC, Congress, or both to strengthen the powers of board members. But such a move almost inevitably would mean reduced shareholder authority to resolve these disputes.

“It’s difficult to see how you can (increase directors’ powers) without diminishing the power of shareholders, which seems wrong to me,” says Pamela Wilson, a mutual fund lawyer with Hale & Dorr in Boston.

One result was clear: The public spat didn’t help Chicago-based Yacktman Asset Management. The Yacktman Fund lost more than 60% of its assets in 1998, dropping below $400 million.