Attention is being focused on the role and impact of the proposed board of management in pension funds contained in the Dutch industry-wide body VB’s new pension fund governance code.
The VB presented its new code as part of the ongoing debate between the social partners and the government. Social affairs minister Aart Jan de Geus demanded that pension funds set up a new code.
The proposed board of management will be a supervisory board, formed by all economic partners (employers, employees and pensioners), with a full control over the management board of the respective pension funds.
The body says this has become
a necessity – due to the changing environment for pension funds. Additionally, calls for increased transparency and accountability make these changes a real
VB chairman Ton Wennekus told IPE the code was a sign of the times, meeting the demand for transparency and the need to revamp trust of all parties in the performance of the funds.
In 2001, the VB came up with a transparency plan, which resulted in a new operational corporate pension fund system last year. This shows VB member funds’ standards and annual performance. Wennekus says: “We want to show accountability to the economic stakeholders.”
The proposed board of management will have the power to call for a discharge of the pension fund board. One other major issue that needs to be covered by the code is the need for increased knowledge of pension fund board members.
The specific needs should be stated, controllable and functional, and every member should comply with them.
Both Dutch pension associations has reacted to de Geus’ call. The OPF, the body representing company sponsored funds, came up with 24 recommendations while the VB set up a totally new code. According to Peter de Koning, chairman of the VB-working group and member of the Tabaksblat Commission on corporate governance, the code is more functional and practical.
The VB code would constitute a new powerbase within the pension funds to control the performance of the fund itself.
A major issue for the future, if the code is implemented after December 2004, is the role of smaller pension funds. According to both Wennekus and de Koning, most small pension funds will not be able to deal with the new changes, greater transparency and the setting up of new instruments.
They both say that most smaller pension funds will disappear in the coming years, forced by growing specialist needs of the board and employees of funds, going up in larger organisations or mergers between several funds. (See news anlaysis page 4).