Nodding heads: Are there any yes men around your trustee table?

A challenge put to the industry this week on the problem of "nodding-head" scheme representatives sparked discussion about how lay trustees respond to professional and independent trustees in their decision-making.

Richard Butcher, managing director at professional trustee company PTL, said: “The nodding-head trustee is a phenomenon that arises around the board table when lay trustees look to the professional trustee to take the lead.

"A nodding-head trustee may concede on decisions even when secretly they might not understand, or think differently on the subject."

A nodding-head trustee may concede on decisions even when secretly they might not understand

Richard Butcher, PTL

Reflecting some of the behaviour studied in 'nudge' theory, lay trustees on boards may often be reluctant to say the wrong thing, ask perceived stupid questions or generally show themselves up. As a result, some might simply follow the direction of the professional trustee.

Martine Trouard-Riolle, director at professional trustee company ITS, said: "One of the skills of a good independent or professional trustee is being flexible to understanding the dynamics of the board."

To address this issue, professional trustees have been called to pre-empt important board decisions with relevant training and ensure the education they provide is delivered at the right level. In the boardroom scenario, independent judgments can easily be clouded by a lack of confidence or uncertainty, in an industry that is becoming increasingly complex.

“It’s important for independent trustees to adapt their style according to the board," said Trouard-Riolle. "You wouldn’t deliver complex swaps and derivatives training when [lay trustees] are struggling with the basics."

Butcher described how he limited his professional influence in the lead-up to a decision on service providers, and set a half-hour deadline on an ultimate decision and voted on paper.

"We debated the remaining two options but couldn’t come to settled conclusion because our subjective judgment was different. Ultimately we wrote down our preferred outcome on paper and showed each other our decision," he said.

But John Paradise, member-nominated trustee director at St. Andrews Healthcare Pension Scheme and executive committee member of the Association of Member Nominated Trustees, said the nodding-head trustee was an industry myth.

“Undoubtedly there are those who struggle," he said. "We can’t forget that member-nominated trustees need support from the board, they’re not generally from a financial background."

Paradise added the role of the MNT was crucial to forging a level of comfort for scheme members. MNTs undergo sufficient training to understand and challenge where necessary, he argued, and are often held in high regard by scheme members. 

“The fact members have one of their own sat on the board provides an important point of contact,” he said.