Strength and Flexibility: The importance of culture on pension boards
29 May 2019 - Estimated reading time: 3 minutes
“With the right people, culture and values, you can accomplish great things”
So said the US businesswoman Tricia Griffiths. But how often do we talk about culture in the pensions industry? And about the culture on pension governance bodies, be they trustee boards, governance oversight committees for say a master trust arrangement, or another body such as a corporate pensions board? Discussions about culture may be seen as too indulgent to take agenda time from pressing matters such as the next communication to members on their investment options, or the ever-complex matter of completing your annual DC Chair Statement. But good board culture is at the heart of good governance and may be critical to improving the overall effectiveness of a board, and ultimately the success of a pension scheme for its members.
I’ve been attending Iyengar yoga classes on a weekly basis for the last thirteen years. In my view, the organisation who provides the classes absolutely has a good culture. My teacher, Jayne, is dedicated to the practice, having been a student and teacher for more than 40 years. She has the right experience, the right skills, and the right attitude and approach to lead our class. Collectively, we have deep experience, and whilst we are all individuals with our own strengths and weaknesses, we all come together week after week, year after year, with a shared attitude of dedication and respect to our practice.
Our classes are run strictly, although there is always the odd humorous moment as we strive to find the optimal combination of strength and flexibility that Iyengar yoga requires. Students must arrive on time – the outer door is locked at 7.30pm – and no late entrants are permitted. We must also be prepared, wearing the right clothes, having the right equipment and having practised at home between classes.
Now let me paint you a picture of a pension board which could benefit from improving its culture:
A Chair who dominates the meetings, steering the conversation and leaving little time for quieter members of the board to input. One of the only other vocal trustees has the idea that effective challenge consists of disagreeing with everything the advisers say. The board are always surprised when all the trustees turn up to a meeting, and those who do tend to skim over the papers on the train down. Several trustees are fed up with the time commitment and demands of the role and arrive at the meeting feeling exhausted and disengaged. Consequently, decisions are either rushed through in line with the Chair’s opinion or deferred meeting after meeting. A tired, stale and fractious atmosphere pervades the meetings.
This board is missing a whole host of things which would improve its culture and effectiveness. Whilst the yoga analogy isn’t perfect, it provides some relevant parallels. Optimal effectiveness, I would suggest, arises from a combination of strength and flexibility. A pension board should have substance, experience, and a range of skills and cognitive diversity. It should be strong. Yet it should also be responsive, open to innovation and new ideas, quick to assimilate new regulations and implement necessary changes, be prepared to change its mind if circumstances change, and move from the status quo if required. The tone set from the top is important – the Chair should be a strong leader without being overbearing. The discipline of a board can be held with the odd injection of humour! And ideally, the board shares a collective vision of its purpose, and a dedication to fulfilling that to the best of its abilities.
In its 2016 report on board culture, the Financial Reporting Council argued that the value of culture should be recognised as a source of competitive advantage, ‘vital to the creation and protection of long-term value.’ Whilst pension scheme boards are not looking for competitive advantage, they most certainly are concerned with long-term value for the pension scheme members. So, a plea for greater attention to board culture and some time out to ensure the right people, culture and values permeate our approach to governance. Let us be strong yet flexible.