Push to extend trustee diversity efforts to company board selections

Speaking at the National Association of Pension Funds' 2014 investment conference, industry figures outlined the advantages of diverse boards.

“One challenge less-diverse trustee boards have is that they don’t represent the people they [are there to] represent, which can create challenges over communication,” said Joanna Matthews, chair of Royal Mail Pension Trustees. “Groups that all think the same way tend to get stuck in a rut.”

Diversity strategies have been growing in popularity among institutional investors, especially around gender, skillset and nationality.

As gender diversity on trustee boards has increased, the debate has shifted towards how to increase the number of women coming up through to company boards.

“This is now seen as a business issue in this country,” Helena Morrissey, CEO of Newton Investment Management told delegates. “The debate is now how do we get more women coming through the pipeline.”

Morrissey cited a study from Société Générale, which suggested boards needed at least 30 per cent of their members to be women to see an improvement in performance.

Encouraging diversity on trustee boards helps companies develop broader governance skills, which in turn improves the pool of available candidates for company boards.

Matthews said: “Trustee boards could be a stepping stone for people to move on to company boards... They can and should lead the way on this.”

Barriers to entry

However, she raised concerns about the lack of diversity among MNTs being appointed to company boards, especially in those with a strong union presence.

“I have two schemes with very heavy union representatives, and while those MNTs that come through the unions are lovely, committed people, they are very much all of a type,” said Matthews. “In one of those businesses they have a strong young Asian male workforce but I have yet to see any young Asian males on the trustee boards.”

Last week, the Local Authority Pension Fund Forum announced its support for diversity initiatives adopted by Legal & General Investment Management.

LGIM’s approach states that it will vote against board or chair nominations if they fail to set diversity targets, appoint women to the board or adequately disclose their gender balance.