TRUSTEE MOTIVATION
Managing motivation
Keeping motivated through both the good times and the bad is important if a trustee board
is to remain effective. Maggie Williams investigates
N
obody would argue that
member-nominated trusteeship
is a tough job. From the
nervous anticipation of that first
trustee meeting, through to the
complexities of funding negotiations,
there is always something new and
challenging to approach.
Not all aspects of trusteeship
are pleasant either – delivering
messages around scheme deficits
to the scheme sponsor, or bad
news on investment performance to
defined contribution members are
hardly tasks that any trustee looks
forward to. How, then, can trustees
remain motivated throughout the
tough times as well as the exciting
ones?
GETTING STARTED
As the rules stand, at least one
third of any trustee board must be
made up of member-nominated
trustees (MNT). The Pensions Act of
2004 also proposed increasing that
proportion to 50%, although that
proposal has not as yet been put
into effect.
However, research carried out
by the Department for Work and
Pensions (DWP) and published
in July 2010 found that for many
schemes recruiting sufficient MNTs
to meet the current requirement of
one-third is proving challenging.
Barriers included perception of the
role as too technical or “boring”;
office politics; placing individuals
in potential conflict with their
employer; time commitment; fear of
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a negative impact on a MNT’s main
job role and perception of personal
liability.
While some of those factors will
be familiar to any MNT reading this
article, there are other concerns
in the list that, with the right
guidance, can be quite easily
dispelled. So how can schemes
inspire members to become trustees
in the first place? Ensuring that
potential trustees understand the
importance of the role and what
they can bring to it in terms of their
existing work skills and knowledge
is one key consideration. Making
sure that it is clear what the role
entails is another – plus plenty of
reassurance that even if they are
not a specialist in all of the skills
required, that there will be support
and training to help them.
Each scheme is different in
terms of how it approaches trustee
selection, but in practice the process
generally boils down either to a
scheme’s members voting for the
trustees that will represent them, or
through a selection board process
managed by the existing trustees.
The benefit of the former is that
it engages the entire membership
in deciding who represents their
interests; but the latter gives the
board more of a say in the types
of skills and experience that they
need. For example, if an outgoing
trustee has expertise in a particular
area such as investment, the board
might want to look for a direct
replacement, for that sets of skills.
MANAGING EXPECTATIONS
Once a new trustee has been
appointed, getting off on the right
foot is vital – and that starts even
before the first trustee meeting.
Giving new trustees a greater
understanding of their role will pay
dividends across their whole period
of trusteeship. Lynda Whitney
principal consultant at Hewitt,
recommends a mentoring approach,
pairing a new trustee with a more
experienced board member. “That
way the new trustee has someone
that they feel they can go to with
questions which they don’t feel
confident asking in a full board
meeting,” she says. Using this
approach can also mean the new
recruit shadowing their mentor at
meetings with advisors, consultants
and asset managers, therefore
quickly building their knowledge
and network of contacts.
Chris Wagstaff, MNT of the Aviva
scheme, also believes that other
members of the trustee board are
one of the most effective sources of
information on trusteeship: “One’s
fellow trustees are the natural first
port of call. In fact, a key facet of
being a good trustee is being a good
team player.”
GETTING EDUCATED
The Pensions Regulator requires
that new trustees should complete
the Trustee Knowledge and
Understanding syllabus within their
first six months in the role and its
Trustee Toolkit should be the first
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port of call for this.
However, while the Trustee Toolkit
is approachable and well laidout, it still requires a lot of work
from new joiners. Whitney says
that publicly acknowledging the
achievements of trustees who have
completed the syllabus can provide
both a boost to individuals and an
incentive to other trustees. “It can
be relatively low-key, but recognition
such as acknowledging in meeting
packs or even member newsletters
that someone has completed the
syllabus can be very effective.”
The objective behind training is
to ensure that new members of the
board feel confident in their role
and can participate fully as quickly
as possible. It is also an essential
part of on-going trusteeship. And,
the employer should also have a
role to play in training provision.
Organisations that are supportive of
trustees’ need for training, willing
to pay for it and prepared to enable
them to spend an appropriate
amount of time away from their day
job to receive it are likely to benefit
both from more engaged trustees
and improved scheme governance.
MIX AND MATCH
Active MNTs are only one of
the constituents of a full board.
Pensioner trustees can be amongst
the most motivated and committed
board members – and often have
extensive experience that they can
pass on to more junior members.
They may often have more time to k
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28/09/2010 11:43
TRUSTEE MOTIVATION
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”
TKU 17/51/86/37
If an independent trustee is
incorporated in the right way to a
trustee board it should be a source
of comfort to member-nominated
trustees, rather than implying any
shortcoming on the part of the rest
of the board. In an independent
trustee there is someone that can
be used as a sounding board and
who can be called upon to discuss
any concerns the other trustees
may have. ■ Admin PMS281
Derek Watson
AEGON Trustee Solutions
PMS690
spend on trusteeship than
their active colleagues
and may therefore be
in a good position to
mentor others.
Independent
trustees are also
an increasingly
common
part of
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the trustee mix.
With a wealth of
knowledge gleaned
from a variety of different
schemes, independent trustees can
support their member-nominated
counterparts in developing their own
knowledge, as well as providing
the benefit of removing potential
conflicts of interest in sensitive
situations such as employer
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covenant
negotiations.
The overall structure of the
board and the people within it can
have a significant effect on trustee
motivation – if employer-nominated
trustees (such as a finance director)
regularly overrule the views of their
MNT counterparts, or if a dominant
character ignores the input of
other members, that can have a
significant impact on the overall
motivation
levels of the board.
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While it’s the responsibility of
the whole board to work effectively,
the trustee chair has a big role to
play in defusing any interpersonal
problems. “The chair should seek
to keep everyone engaged at all
times by ensuring that everyone,
without exception, feels included
in the decision being made,” says
Aviva’s Chris Wagstaff. “After all,
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the diversity
of the committee has
the potential to reach what should
prove to be a more correct answer
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than that arrived at by
any one individual,”
he adds.
Wagstaff also
points out that
it is often the
information that
individuals don’t
share that is key
to finding the right
decisions. “Introverted
members within the
committee should be
positively encouraged to contribute
to the debate and given as much air
time as the extroverts,” he advises.
“Dissenting views, in particular,
should not be ignored in the
interests of time and efficiency.”
TO PAY OR NOT TO PAY?
It’s difficult to address the topic of
trustee motivation without raising
the thorny issue of payment.
Research carried out by Engaged
Investor and Pension Corporation
in early 2010 showed that 62%
of scheme trustees believe that
they should be paid for their work.
The increased level of expertise,
time commitment and level of
responsibility involved were some of
the main reasons that respondents
gave for wanting to be paid.
But, as with most other walks
of life, money does not guarantee
motivation. And decisions on
whether to pay trustees will rest
with the scheme sponsor. While
payment might acknowledge the
time and effort that the job requires,
the primary motivation for being a
trustee has to rest in its ultimate job
description – to look after the best
interests of the scheme members. n
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If the gap in time
between training and
using the skills trustees
have learnt is too great,
the knowledge will
simply fade away
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Governance
Clinic
Another way
of addressing
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the pressures
that trustees feel
in situations such as covenant
negotiations is to appoint an
independent trustee. Both the
employer and the trustee board
can consider this a part of good
governance, even though there is
a cost attached. The very nature
of an independent trustee brings
professionalism
greater
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Black
familiarity with
general market
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conditions, as he or she will
work with a variety of different
organisations. They will be aware
of how other schemes have
addressed the same challenges
and will be more comfortable
with raising difficult issues during
employer covenant negotiations.
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The standards of trustee
knowledge and understanding that
the Pensions Regulator expects
have increased considerably over
the last few years. The Regulator
does its best to support trustees in
achieving those standards with the
introduction of the Trustee Toolkit,
but inevitably trustees quickly
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out of their depth around
issues such as scheme funding
and the employer covenant. And
although they are expected to take
professional advice, they are also
obliged to understand that advice.
Employer-nominated trustees,
such as a finance director
(FD), might understand more
of the complexities involved in
negotiations around the employer
However the conflicts
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@covenant.
of interest that these negotiations
raise – with the FD aware of the
scheme’s needs, but ultimately
also concerned about the
employer’s broader profitability
– often mean that the FD
withdraws from such discussions.
That can leave the rest of the
trustees without one of their most
knowledgeable board members,
exactly the point when their
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expertise is really needed. That
also means the remaining trustees
have to rely too much on the
scheme actuary’s advice – but
when they are challenged on the
information they’ve been given
by the actuary they aren’t in a
position to respond.
Providing training at the right
time is one solution to ensuring
trustees can handle this situation.
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training that deals just
with the employer covenant, for
example, is of most benefit just
before trustees need to enter into
negotiations. If the gap in time
between training and using the
skills trustees have learnt is too
great, the knowledge will simply
fade away – after all, it isn’t their
day job. It’s also reasonable for
trustees to ask the employer to
for that training and allow
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them time away from work to do
it, although that doesn’t happen
as often as it should.
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Derek Watson examines some ways of supporting
trustees through difficult situations such as covenant
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negotiations
Enabling member nominated trustees (MNT) to share their experiences
of trusteeship and learn from others in the same position is not always
easy, given the part-time nature of the role and the fact that trustees are
located in all corners of the country.
However, a new organisation, the Association of Member Nominated
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Trustees
(AMNT) has been formed with the objective of providing
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support to MNTs across the country. Janice Turner, MNT of the BECTU
Staff Retirement Scheme is standing to be Founding Chair of the
Association. She says: “Most new trustees feel somewhat overwhelmed
by the complex nature of pensions management and terminology, their
comparative lack of knowledge, and the vast sums of other people’s
money that they are responsible for and upon which many people are
depending for their retirement.”
The AMNT is still in the early stages of development at present.
See our news story on page 8 for more information.
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