UK - The potential for conflicts of interests should not put people off from becoming a trustee, as resignation is now seen as the 'last resort', lawyers have claimed.
Commenting on recent developments concerning trustee appointements and how to tackle perceived conflicts of interest, Sarah Phillips, a solicitor at Sacker & Partners, told delegates at the National Association of Pension Funds (NAPF) annual trustee conference in London last week as The Pensions Regulator (TPR) has placed more emphasis on controlling conflicts of interest, there are now alternative options available in these situations.
She admitted there was "no one-size-fits-all approach" as it depends on the scheme and the type of conflict, but possible options or combinations, could include;
However Phillips noted appointing independent trustees would not necessarily be the obvious solution, partly as some schemes could not afford to appoint one, while the circumstances of the conflict could mean that it would be good for some schemes but not others.
Phillips also told delegates at the NAPF the conflict of interest resulting from the possession of confidential information is also complex to deal with, as there are differing views as to whether there is an obligation on trustees to share this information.
As a result, she pointed out withdrawing from the decision-making to avoid a conflict "does not absolve you of the duty to disclose information", however she added the decision to resign as trustee is now seen more as a "last resort" when the conflict is perceived to be "acute or pervasive" and there is "no other option out there".
She said: "In a way, this is quite comforting as at one point it was thought that schemes couldn't have finance directors on the board any more and they lost a lot of expertise as a result. Now there are ways around it."
However, Phillips added while the recent guidance from TPR highlighted the chair of trustees as an important role in resolving conflicts of interest, if it is a serious conflict, such as the use of confidential information, the chair could then also be compromised.
"The role of the chair is important, and it is good for the trustee to know who to go to but there are some issues. The problem is if a trustee is in real conflict and tells the chair, then they are in conflict too. If it is something which you don't think is too big a problem, then this is the right way to go, but if it is a real issue, don't tell the chair," she said.
Meanwhile, Phillips also argued there are benefits of introducing a conflict register, where trustees record all the other roles they hold, such as scheme member, shareholder, finance director, to make it easier to identify potential areas of conflict.
"It helps plan ahead, for example if you know there's a valuation in the next 12 months, or if there is the possibility of a corporate restructuring, you can think about it in advance and see if there might be any conflicts," added Phillips.
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