How do you run a trustee election?

Anyone watching the news over the past few months will know elections can be tiring, expensive and downright dirty processes, so how can trustees make sure they are getting the most from their member-nominated trustee elections, while avoiding the headaches that can come along with them?

The process of appointing a member-nominated trustee or director to the board typically starts by members electing someone or nominating candidates, one of whom is then selected by the scheme.

The nature of the skills and experience needed around the board are very different to what they were before

Mark Hodgkinson, Muse Advisory

The Pensions Regulator released its codes of practice for appointing member-nominated trustees in 2006, outlining the principles schemes should consider when carrying out an election or selecting trustees or directors for the board.

The codes lay out principles rather than specific steps. It states trustees must make sure any process is proportional, fair and transparent.

Adrian Kennett, director at professional trustee company Dalriada Trustees, said clarity of communication is crucial.

“You have to keep it simple, these aren’t full-time pension professionals,” he said. “You need to consider your audience when drafting your communication.”

Kennett added help was often easy to find: “If you go to any consultant they’ll have their off-the-shelf member-nominated trustee process and standard communications that should be compliant.”

Advisers and consultants often take the lead when dealing with board appointments, said Jonathan Reynolds, client director for professional trustee company Capital Cranfield, especially when they have extensive prior experience with the scheme.

“It tends to be fairly adviser-led in my experience, because you tend to go with what you did before,” he said.

The codes of practice require schemes to consult their active and pensioner members on appointments. There is no requirement to seek the views of deferred members, however many schemes still do.

Jay Solanki, head of consulting services at Premier, said: “The only members you need to consult with are actives and pensioners.”

“To my mind, unless you have a good reason you should include deferreds.”

Solanki added schemes traditionally had been hesitant to appoint deferred members to the board as they could be privy to sensitive information about the scheme and employer, while working for a competitor. To get around this, many trustees are required to sign non-disclosure agreements, he said.

Electing for diversity

Historically there has been debate around the level of diversity on scheme boards, with concerns raised about the lack of gender equality. To mitigate against this, the Pensions Trust last year removed candidates names from ballot papers so members were unaware whether they were voting for a man or woman.

Solanki said: “You want to preclude people from having some preconceived ideals. In some circumstances you want to make it anonymous, but if you’re doing the selection you’re going to meet the person anyway.”

“If you’re worried about that I’d say put as much independence on the trustee board as possible.”

Consultants said electing trustees was more common when member-nominated trustees were first introduced through legislation in 1995, but selection has become more popular as the role of trustees has grown more complex and demanding.

Mark Hodgkinson, director at governance advisor Muse Advisory, said: “The nature of the skills and experience needed around the board are very different to what they were before.”

However, he added the argument for trustees with direct experience of the scheme was stronger for defined contribution schemes.

“It’s important to have live employer experience around the table when talking about how the scheme is working and member engagement.”