Case Study: Building an Effective Trustee Board (Pensions)

Changes implemented

• Reduced Board size from 12 to 8
• Introduced Member Nominated Trustee selection in place of election
• Re-defined sub-committee terms of reference to increase empowerment and clarify main board direct responsibilities
• Selective changes to advisory team
• Blackberry/cell phone ban coupled with breaks in meetings for other business

Key success factors identified

• People are key – think about them, respect their feelings and views, seek consensus and don’t assume you know what they think (ask them).
• Adhere to principles while addressing legitimate concerns. For example "we will address your concern that the Company should not be able to influence the outcome but I am not prepared to drop the principle of MNT selection".
• Focus on accountability. For example Board approve new investment classes; once approved Investment Committee is responsible for implementation. That way the Board make strategic investment decisions but the IC is empowered to act.
• Build for the long-term, but don’t get stuck. Decisions to retain or change advisors made based on their contribution relative to the Board’s current needs, not on tenure or history.
• Careful choice of timing. For example reduced size of Board when several trustees were stepping down anyway.

Outcome

• Board clearly accountable for strategy and outcomes
• Streamlined decision-making
• Diverse opinions harnessed to add value not generate argument
• Strong engagement and sense of purpose amongst trustees with close to 100% attendance at and attention to board meetings
• Improved sponsor satisfaction

These changes took a couple of years to define and implement. The strong culture has underpinned further developments including a high turnover of trustees.