Between two boards: Balancing the dual roles of exec and trustee

The role of pension scheme trustee has entered a new age of complexity.

The whirlwind changes and challenging market conditions of the past 18 months have opened a Pandora’s box of new demands for trustees.

Trusteeship requires an in-depth knowledge and understanding of employer covenant, scheme membership and, more often than not, an element of investment expertise as schemes seek long-term solutions for rising liabilities.

Many smaller sponsors and schemes will be keen to draw on the expertise of company board members, but must be alert to potential conflicts of interest that could arise from fulfilling the two roles.

It’s hard to put your best foot forward as a trustee when you also have to think about the financials of the business

Chris Roberts, Dalriada

Chris Roberts, trustee representative at professional trustee company Dalriada, said boards assessing a potential conflict need to decide whether any clashes that arise are manageable on an ongoing basis.

He said: “In certain circumstances with high-ranking employer roles I think it’s to the point where acting as a trustee and chief financial officer is becoming harder and harder because both roles have such separate requirements.

“It’s hard to put your best foot forward as a trustee when you also have to think about the financials of the business.”

Roberts said many schemes will have a conflicts register in place for anyone with a vested interest in scheme decisions, and it is important to also consider conflicts that could arise if a trustee or a trustee’s family member is affected by a scheme decision.

“One of the main ways people manage conflicts is by bringing in a professional trustee who can act as an independent go-to, effectively an assessor to keep everything on an even balance,” he said.

Tough talks 

Bill Whitehead, independent trustee at professional trustee company Pentrus, said trustee chairs had an important role to play in the ongoing monitoring and management of conflicts.

“If you do have a board member that’s a trustee, you would expect in debate on certain issues those conflicts to be declared and either that person does not contribute to the debate or to leave the room," he said.

Whitehead said it was important for trustees to be viewed as independent of the company, and the first priority for all trustees, whether board members or not, must be their fiduciary duty to members. 

“If you have someone like a finance director sitting in as a trustee… a lot of the time that’s not a problem, but if you have a dispute over the funding of the scheme or over the trustees’ assessment of the financial shape of the company… good efficient chairmanship [is needed] to make sure that conflict doesn’t cause problems,” he said.

However, Martin Kaye, non-executive director at trustee company Ross Trustees, said there was potential benefit for schemes encountering conflicts and differences of opinion in meetings.

“If someone from the board is a trustee and you’re talking about the recovery plan, that conflict is the same one you have… when you go to the company,” said Kaye.

“It helps things – it’s only playing out conflicts that would occur anyway,” he added.