A recent New York Times Dealbook article by Azam Ahmed focuses on hedge fund boards of directors--a group that receives far less attention than their peers in public companies. According to some experts quoted in the article, hedge fund directors are not exercising proper oversight because they sit on the boards of dozens, if not hundreds, of funds.

While the quality of hedge fund directors may indeed impact investors, investors would be mistaken to think that a diligent board is necessary or sufficient to ensure that a manager acts in their best interests. Rather, the key to good hedge fund governance lies deeper. It consists of sound operational practices and properly-aligned fee structures. Key among these sound operational practices are internal controls and transparency relating to performance, risk, and valuation. Operational practices can be controlled by investors themselves and independent administrators and other third-parties, and has increasingly become the case since the financial crisis of 2008.

And while hedge fund fees are likely too high on an industry-wide basis, as fund manager Cliff Asness noted about management fees to some fanfare at the 2012 Delivering Alpha conference, investors should probably be more concerned about fee structure than level. This is because a proper structure helps to ensure that there is an alignment between the performance fee payment period and the fund's investment horizon, which prevents managers from being paid long before actual gains are realized. (Indeed, higher performance fees may provide better incentives for managers to outperform for investors.) The following graph from a 2009 report by Casey Quick and the Bank of New York Mellon supports an argument which suggests that investors and managers could both gain if fee calculations are tied to a manager's long-term ("cumulative") performance:

To date, however, only a small minority of hedge funds offer longer-than-annual performance fee structures.

Importantly, good governance characteristics can be attained regardless of whether the board acts as an independent check on management. Indeed, the overwhelming majority of U.S.-based hedge funds don't even have boards, and there is no evidence to suggest that they are not governed as well as their non-U.S. peers. According to a 2011 Ernst & Young survey, only 15 percent of North American hedge funds have boards.

So while it may be the case that professional hedge fund boards are nothing more than a rubber stamp for managers, the real issues is the extent to which that should even matter to investors given what are likely more important aspects of hedge fund governance.