The increased recognition of the benefits that a diverse trustee board can offer provides another dimension against which schemes across the industry are starting to focus. A recent trusteeship survey conducted by WTW alongside a similar PensionChair Network “Consult the Membership” survey run by Winmark, which together received 227 responses, provide a comprehensive snapshot of the current recruitment, appointment and remuneration practices adopted by various schemes.
The survey took a detailed look at several aspects of the Member Nominated Trustee (MNT) recruitment process. It found that most schemes (77%) include an element of selection in their recruitment process. For some schemes it’s purely selection. For others, interviews conducted by a balanced panel may follow an election process or an election may be held between candidates filtered based on pre-identified skills or attributes.
A selection process allows better influence over the quality and diversity of trustees, and also avoids the risk that only candidates who are otherwise well known are elected or that potential candidates are put off by having to participate in an election. Selection is supported by The Pensions Regulator (TPR) who has cited it as one of the key ways to attract more diverse candidates to a board.
The survey also shed some light on current nomination practices, highlighting that most schemes (85%) require one or two nominations as part of the recruitment process. Arguably, the need for a nomination process is reduced as selection becomes more common across the market. Recruitment has become increasingly challenging for many boards over recent years given the rising complexity of the trustee role and shrinking membership of many schemes, so we may start to see some schemes taking steps to boost the pool of potential candidates, which could include relaxing nomination requirements.
While a typical Employer Nominated Trustee (ENT) appointment does not come with a fixed term (79% reported no fixed term), a significant number of MNT appointments (90%) do have fixed terms, with a majority (56%) choosing three to four years. A fixed term approach to MNT appointments is supported by TPR, who noted in its equality, diversity, and inclusion guidance that fixed terms “can be beneficial as it encourages a scheduled change of individuals on the trustee board bringing new personalities, dynamics and perspectives to the group’s decision-making.”
The results of the surveys also showed that in most cases there was no maximum number of terms for most trustees (97% of ENTs and 95% of MNTs had no maximum). With the increasing focus on diversity of thought among trustee boards and the adoption by schemes of practices aligned with corporate governance, it will be interesting to see whether schemes start to shift their approach and whether a maximum number of terms starts to become more commonplace, across ENTs and MNTs. (Our experience is that it’s already relatively common for Independent Professional Trustee appointments to include a maximum number of terms, in line with TPR guidelines.)
Moving on to remuneration, the survey found that for pensioner MNTs there is a fairly even split between those who are remunerated and those who are not. As with many aspects of trusteeship, more and more schemes are considering the impact of their practices on board diversity, and here TPR has recognised the potential diversity benefits of remunerating trustees, noting that “by paying trustees, the pool of potential candidates grows beyond those who can afford to give their time unpaid”.
For employed MNTs, the majority (around 86%) do not receive remuneration. However, there are often practices in place to ensure paid time off is protected and routinely enforced to allow employed MNTs to carry out their role – indeed the communication and enforcement of such practices is another way to boost interest in trustee roles.
The design of trustee recruitment practices can often require a delicate balance. Pulling in one direction are the optics of moving away from long-established and often highly visibly democratic norms – such as strict geography, employer or member constituency requirements or entirely open elections. But pulling in the other direction with increasing strength, are diversity principles around appealing to a wide pool of possible candidates, dismantling potential barriers that apply particularly to certain demographics within the membership, and introducing intentional and informed selection to solve for specific skills, demographic or cognitive diversity gaps. Our view is that the latter is both desirable and possible whilst retaining the appearance and reality of fairness and transparency.
The good news is that, based on observed experiences amongst our own client base, a revamp of recruitment process rules, together with a re-look at how the role is communicated and the process administered, can yield impressive results – serving up the size of candidate pools permitting genuine choice between high quality candidates with just the attributes the scheme is looking for.
