news article

Pension Fund Boards should take lessons from Corporate Boards

07 September 2011

Muse Advisory, the independent pensions governance and administration consultancy, said today that UK pension funds could learn a great deal from their corporate counterparts.

Mark Hodgkinson, Director at Muse, commented: "The demands of pension scheme governance seem to have grown exponentially over the last 15 years, but the operating models of many trustee boards have not developed adequately over the same period. Sadly, the result is that many boards are simply not fit for purpose to meet the demands of 21st century pensions governance. Back in the days of perceived pensions surpluses it seemed acceptable for trustee boards to be reactive and adviser led, but that is not characteristic of the most effective trustee boards of today. Today's truly effective boards are led by exceptional chairmen who garner talent around the trustee table and delegate management activities in order to focus the board's energies on the strategic agenda."

Hodgkinson continued: "Contrast this state of affairs with the standards of governance trustees expect of the boards of companies that they choose to invest in. Why should pension scheme members not expect similarly demanding standards of governance from their own pension scheme's trustee board? Any board that is striving to enhance its capability and effectiveness should pay attention to the UK Code of Corporate Governance that sets the standards for companies listed on the London Stock Exchange. The code sets out very clearly how company's Boards are expected to operate and includes valuable guidance on the roles of the Chair and committees. A good start would be to ensure that every trustee board chairman has a clear role profile that sets out the Chairman's responsibilities for shaping and leading an effective board. Much of the groundwork for establishing greater board effectiveness has been completed and is incorporated in the Code and accompanying guidance. Whilst it is designed to ensure focus on shareholder's interests, the concepts can equally be applied by pension fund trustees who are charged with safeguarding members' interests."

ENDS