Deciding on the size of your trustee board

Typically, I would reply that in my experience of governance and board effectiveness reviews, size does not matter. Instead, what is important is the ability of each individual to carry out the trustee role, as well as their collective effectiveness in making good decisions. 

Would a smaller board, meeting more frequently than quarterly if necessary, lead to more efficient decision-making and implementation with less trustee time spent overall?

In many cases, behind the question of size – which prompts a quantifiable response and is therefore relatively easy to ask – is at least one of three questions that are more fundamental and qualitative.

Efficient decision-making

The first question is, “How can we work more effectively as a trustee board?”

The two main components of the trustee role are making decisions and holding ourselves and (largely) others to account for implementation of these decisions.

Sometimes a reason for having a larger board is to have sufficient trustees to populate the committees. However, this may indicate that a significant amount of trustee board time is taken up with receiving reports and updates from the committees – ie the trustees reporting to themselves.

Would an alternative approach of a smaller board, meeting more frequently than quarterly if necessary, lead to more efficient decision-making and implementation with less trustee time spent overall?

The above response is of course based on the current approach of quarterly trustee board and committee meetings. Technology now exists that means things can be done slightly, or even completely differently.

The second key question is, “How can we work with the sponsor more efficiently?”

The nature of the dialogue between trustee boards and the sponsoring employer varies, from managing a significant defined benefit liability through to the optimal design for the defined contribution scheme.

Many trustees and sponsoring employers now have in place a joint working group to enable discussion of several issues, including funding and investment, covenant development, DC strategy, governance, controls and costs.

Typically, such a group includes representation of the trustee and key corporate functions. Where a sole corporate trustee is appointed, this type of body provides the key trustee and employer interaction. 

For most schemes, and for most of the time, governance structures should support a collaborative approach in ‘business as usual’ mode. Through such a group, relationships can be built that will enable matters such as valuations and corporate transactions to be worked through, where a more formal approach is required.

Choosing the right trustees

The third question is, “How should we choose our trustees?”

Broadly speaking, a trustee board’s approach to selecting member-nominated trustees is either largely based on representation of different constituencies of the membership using an election process, or primarily focused on obtaining particular skillsets by use of selection.

Many trustee boards and sponsoring employers also aim to ensure the employer-appointed trustees are also selected based on required skillsets. 

The representation approach tends to lead to larger trustee boards, even though the role of each trustee is exactly the same: to act in the best interests of the membership as a whole. A wealth of long-standing and expert trustee experience has been built up in these roles.

As an alternative approach to seeking member views to help with future succession planning, trustees could consider use of either a regular member forum or member workshops where there is a particular matter on which to seek member views. Either approach could allow a broader discussion with the membership.

Taking into account all the factors mentioned above, if pushed into giving an answer to the question of trustee board size I would say somewhere between three and nine trustees is ideal. And if you have a sole corporate trustee, ensure you are getting a range of perspectives from within the organisation providing those services.

Rachel Croft is director at Independent Trustee Services