Any other business: Encouraging and making the most of conflict and disagreement is one of the key drivers of innovation at one of the world’s most high profile companies.
Online retailer Amazon's chief executive officer Jeff Bezos has been reported to have a confrontational style, even going so far as to include the willingness to disagree as one of the company’s leadership principles for employees.
Can pension schemes learn from the company's belief that “leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting"? And how can they make sure that their governance continues to function even when consensus cannot be reached?
If every board was in complete consensus then that would be no help
Roger Mattingly, Pan Trustees
A few areas that commonly lead to disagreement among trustees are issues such as divvying up death benefits or judging the validity of a claim for an ill-health pension.
Richard Butcher, managing director at professional trustee company PTL, said: “The area where it is most common is where trustees fail to manage conflicts of interest.
He added: "For example during [defined benefit] closures where trustees have fought to keep the scheme open when if it’s in the scheme rules we don’t have any choice. Or, in funding negotiations conflicted trustees will give too much weight to the employer.”
While disagreements do arise, experts said it is rare that they do not ultimately end in consensus after discussion.
“There are usually differences in opinion, which might affect investment strategy or death benefits,” said Alan Pickering, chair at professional trustee company Bestrustees. “But in my experience people, even though they might start off differing, tend to find a consensus.”
Managing disagreements
The key to managing disagreements – when consensus cannot be reached – is to focus on the decision-making process.–
This can be achieved through an established formalised method of decision making so trustees can judge that a decision was reached equitably, even if they end up being outvoted.
“I try to ensure the one individual who is in the minority is happy with the process, even if they aren’t happy with the outcome,” said Pickering.
Pickering’s view was echoed by Butcher: “Whenever we make a decision we go through a decision funnel where you regard the relevant facts… as long as you direct yourself correctly down that funnel you will have disregarded irrelevant factors. Once you have done that its a case of personal preference.”
When a consensus cannot be reached, trustees may have to rely on their processes and accept the majority view. This is especially true for decisions which need to be made urgently.
“I let them talk the thing through first,” said Pickering. “If it’s in relation to a subject where we have to make a decision today I might accept a majority view. If it’s not imperative I and the scheme secretary would take it away and tweak it to see if we can reach a consensus.”
Butcher said when reaching a compromise between opposing parties it can be best to “find the place where both parties are a little uncomfortable.”
Roger Mattingly, director at professional trustee company Pan Trustees, said that this may be a good thing. “If every board was in complete consensus then that would be no help… it’s rare to get a utopian decision, you tend to get a preferred decision,” he added.
