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Special Report

ESG: The metrics jigsaw


Focus Group: Split on high pay for trustees

Nine (40%) of the investors polled for this month’s Focus Group say diversity is important or very important on a pension fund board. Just two consider it to be unimportant, although 11 are ambivalent about the issue.

“The board should resemble society, especially the people a pension fund is working for,” according to a Dutch fund, while the president of the board of trustees of a Spanish fund adds: “It’s important to have different points of view and opinions from different perspectives.”

However, a Belgian fund is less convinced and states its opinion simply: “Expertise is more important than diversity.”

On average, the funds polled have three women on their board, compared with two in the 2015 survey. A Danish fund has the most women on its board (10), while two fund boards include no women. Four funds have more women than men on the board, which is double the number from last year’s survey. However, less than a quarter of respondents say their board is more diverse than others in terms of gender. 

Over three-quarters of respondents have unpaid trustees/non-executive board members, while just under half have paid trustees and almost a quarter have paid trustees in an expert capacity. Six funds expect these trustees to spend more than one day a week on matters relating to their fund. Five expect between one day per week and one day per fortnight; four, between a day per fortnight and a day per month; and seven, less than a day per month.

Respondents are equally split regarding the time they expect trustees to spend on training, with half stating less than a day per quarter and half between a day per month and a day per quarter. A UK fund comments: “I believe that there should be ongoing training for issues that arise – for example, changes in law and for general matters in acquiring as much knowledge as possible. There is no limit to training and it should take place as often as necessary.”

ipe july 2016 focus group poll

Sixteen funds have arranged training courses themselves in the last year, while 11 say their trustees have attended courses arranged by a national association or training body; eight did courses arranged by a consultant; seven, courses arranged by an asset manager; and five, courses arranged by another external body.

Almost half of those polled agree that a relatively high level of remuneration for both executive and non-executive board members is necessary to guarantee successful management of a pension fund. “For expert or professional trustees, an appropriate level of remuneration that recognises the level of responsibility and time commitment is important in getting the right person,” says an Irish fund.

Six respondents say the trustees or board sets the level of remuneration. Two say it is set by a special committee, and one says by the sponsor.

Views on the appropriate level of annual remuneration for trustees vary from €25,000 for an Irish fund to €150,000-200,000 for a Dutch fund. A UK fund states: “Remuneration should be based on the amount of time required of trustees and their skills (that is what they bring to the table).”

Several respondents highlight training and diversity as two areas in which pension fund boards could improve, while a Dutch fund says boards should “focus on important (policy) matters and not on individual details”.

A Swedish fund points to separation of duties. “Let a full-time CEO hire staff and handle the operative work, while the board sets up limits, strategies and does follow up/control. Then the board will be able to evaluate if the CEO or the board were successful or not.”

Respondents employ 14 full-time investment and other staff members on average. A Danish fund has the most employees – 150. Over the past five years, employee numbers have increased for seven funds, decreased for two and stayed the same for 11.

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