To many people the adage 'pale, male and stale' will resonate in the context of pension scheme trustee boards, but diversity, in this setting, means more than simply altering the gender balance.
True diversity also encompasses the age of trustees, ensuring the board has the breadth of knowledge, skills and experience required that goes beyond the ability to complete the trustee toolkit.
In an increasingly complex business and regulatory environment, the need for complimentary knowledge bases on the board has never been greater.
For MNTs, greater emphasis should be given to selection rather than election
But while it is commonplace for charity trustee boards to actively seek out individuals who can bring particular skills and knowledge to the board, the ability to do so on pension trustee boards is limited.
When appointing employer-nominated trustees, sponsors have to be wary of creating conflicts of interest, which may mean that often the best-qualified people in the company have to be overlooked.
In the case of member-nominated trustees, simple election processes may lead to popular and willing people being appointed, but not necessarily the best-qualified trustees who are able to meet the needs of the board. The MNT selection process should therefore be more attuned to the need for greater diversity.
How to achieve diversity
Sponsors need to broaden their view of who might be appointed and avoid the trap of ENT appointments being appended to particular roles in the company.
It is easier for the sponsor to include gender, age, ethnicity, and knowledge requirements in their selection process – particularly where the existing board membership is, as is typical, male and aged over 60 years old.
For MNTs, greater emphasis should be given to selection rather than election. It would also make sense that when a vacancy arises, emphasis is placed on the need for greater diversity. Making it known that the board would welcome applications from women, younger members of staff, or those with a particular skill set or knowledge is not unreasonable, and this should filter through to the selection process itself.
You may say that there are not enough people in these groups that are willing to serve, but while that may have been the case in the recent past, it is no excuse for inertia.
Sponsors should make it clear that board membership will be looked on favourably as part of career development. Emphasising at the outset that the appointment is time limited and that the health of the business and the scheme are inextricably linked are also incentives to become involved.
Consider the trustee chair
The same arguments can be deployed where MNTs are concerned. It is also helpful to making the case that serving as a trustee will help protect the interests of all concerned – both members and non-members – as the financial health of the scheme and company are so intertwined.
Industry on right track with diversity initiatives, but further change is needed
The need for greater diversity across the pensions and asset management industry is evident, so what progress has been made so far to improve the situation?
Something that may not usually be discussed in the context of diversity is the position of the chair of trustees. For many sponsors, the 'safe' option is to appoint a respected, retired member of the management team or company director who is usually a perfect fit for the 'pale, male and stale' description.
There needs to be greater consideration given to the increasingly demanding role of pension chair and the need to appoint someone with the appropriate skills and knowledge required.
At a time when the benefits of diversity, both in business and the wider society, has never had a greater profile, it remains a puzzle that so many pension scheme trustees are male and over the age of 60.
No sponsor would run their business on that basis, even if they were only looking at sensible succession planning. Why then do we continue to close our minds to the benefits of diversity in the area of pensions?
Peter Askins is director at Independent Trustee Services
