OPDU Report 24 - May 2008

Trustee Risk Management
Governance: fit for purpose?
Brian Holden MBE

Brian Holden MBE, Chairman of TRM’s Advisory Service, has been commissioned by IPE to undertake a major independent review of the governance principles and structures of European occupational pension funds. The review is supported by Pioneer Global Investments Limited and will be published in November. It will also be in the subject of a seminar presentation to be given in Barcelona on 20 November.

The review will focus on a wide range of pension governance themes, including the role of lay (non-professional) trustees and board members and the strengths and weaknesses of trust, foundation and contract models and whether they should be replaced.

Fundamental points to be reviewed, include:

• What are the main objectives in any model of pension fund governance?
• What is the governance method for your fund? Is it trust-based, pension board, supervisory board etc?
• What is the board constitution? How many representatives from employer(s), employees, others?
• What are the main strengths of this method for pension fund governance?
• What are its weaknesses?
• How do you think that it might be improved?
• What are the main strengths of contract-based models?
• What are their weaknesses?
• How do you think these might be improved?
• Do you think that current governance models need replacing?
• If so, what would you replace them with?
• Should any particular distinctions be made between defined benefit and defined contribution funds when determining an appropriate governance model?
• Should smaller companies/pension funds be subject to any particular considerations?

To date, there has been a good response from those involved in, or interested in, the important topic of pension fund governance and views have been received from respondents across the European pension fund arena

Some of the issues raised so far include:

• What is pension fund governance?
• The fiduciary responsibilities of the trustees, the pensions board and the company.
• Pensions from the company perspective.
• Pension fund regulation and supervision.
• The experience and qualifications of trustees and pension boards.
• Ensuring workable governance processes and internal controls.
• The role of the Chairman and Secretary of Trustees or Pensions Board
• Protecting the fund and the trustees/pension board members
• Getting the risk/reward ratio right
• What are the alternative governance structures and systems?
• Is there an ideal structure?
• Is there the necessary will for change?
• Can pension funds, their trustees and pension boards help each other?

It is important that there is a wide-ranging response to the review. Accordingly, readers are invited to submit their views and opinions on some, or all, of the issues raised above. Please keep all replies succinct including any additional material.

If you would like to make a submission, please respond to:
governance.review@ipe.com
All views will remain confidential.