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Pension Fund Governance: Board effectiveness: From path dependency to integrative thinking

“One of the curses of our industry is path dependency,” says Keith Ambachtsheer, director emeritus of Toronto’s Rotman International Centre for Pension Management (ICPM) and academic director of the Rotman’s Board Effectiveness Programme (BEP) for pension funds. 

The solution, according to Ambachtsheer, who handed over the leadership of ICPM to Rob Bauer this year, is integrative thinking as espoused by the late management guru Peter Drucker.

Ambachtsheer, who also runs the international pension advisory firm KPA and who is a founder and shareholder of CEM Benchmarking, makes no secret of his admiration of Drucker and in particular his 1976 work The Pensions Revolution. 

The BEP, he says, tries to apply integrative thinking in a five-day programme covering key areas including organisational mission, fiduciary duties, board dynamics, investment beliefs and risk management.

“You really do need to think about the relationship between pension design, organisational structure and investing,” Ambachtsheer says. “I think going through this with people reinforces the importance of integrative thinking. The reality is that they’re still isn’t enough of it in the world. We’re naturally siloed people.” 

The first BEP was held in November 2011 and to date has 128 alumni from 52 pension organisations in 11 countries, including QSuper in Australia, AP1 in Sweden and Washington State Investment Board in the US as well as several attendees from the Dutch and Australian pension supervisory bodies. 

The World Bank has supported the initiative, sponsoring delegates from pension organisations in South Africa and Asia.

Overall, across the four programmes that have taken place so far, attendees have scored the programme a respectable 6.3 out of seven. They pay CAD6,950 (€4,725). 

Rotman faculty, including Ambachtsheer and Bauer, undertake most of the teaching but there have been guest appearances from the likes of Mark Wiseman, CEO of Canada Pension Plan Investment Board, which is based in Toronto.

BEP was modelled on the Rotman School of Management’s Director Effectiveness Programme (DEP) – which has been running since 2004 – and shares key features including a multi-faceted curriculum, intensive learning, a class size-cap of 35 attendees, explicit selection criteria and extensive pre-course preparation.

“It had to be extremely interactive because you’re dealing with knowledgeable people in the main,” Ambachtsheer says. “They have a lot of experience and it’s a matter of getting them to share their experiences in a framework that focuses on the issue of board effectiveness in a pension context.”

One of the assignments involves dealing with a pension fund whose board is highly ‘representative’ of its membership but lacking in expertise. “When the group with that challenge presents to the class on the Friday morning they usually have a pretty creative plan and then they can take that home and try it in their own situation,” Ambachtsheer comments.

For the most part, he is pleased with participants’ willingness to engage with an open mind. Mindsets shift from “‘either-or’ choices to more creative, innovative ‘and-and’ solutions,” as he put it in one of his regular Ambachtsheer Letters in December 2013. The letter was headed with a quote from the chief justice of the Supreme Court of Delaware: “No-one should underestimate directors’ need for continuing education”.

Assuming the largest 500 pension plans globally have ten board members on average, Ambachtsheer sees a potential market of 5,000. With 128 attendees so far, the BEP has yet to penetrate 3% of its target market. 

So far, the distance learning element of BEP is restricted to pre-course reading. TED-style lectures and Google hangouts are so far not even a remote possibility, although Ambachtsheer says a chatroom for Alumni is  on the drawing board.

The Rotman DEP programme is held on other Canadian campuses, so what about bringing the BEP programme ‘to market’ in Europe? Could it retain its ethos and international outlook? 

Ambachtsheer says he is exploring the idea of offering the programme internationally in 2015, perhaps through refresher courses. One of his concerns is localised ‘groupthink’, given that a course held in London, for example, would more than likely attract a majority of UK attendees with a similar outlook.

“But there’s no reason, with the right time and energy, that we couldn’t make this travel somewhere else,” Ambachtsheer concludes. 

The fifth and sixth programmes will be held in December 2014 and February 2015 respectively. See www.rijpm.com

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