Will trustees start demanding to be paid for their services as trustees?
The question arises in the light of the new good governance guidelines as contained in the Registrar of Pension Funds Circular PF 130. The good governance guidelines take the duties of trustees and the principal officer to a new and higher level than before. In terms of the guidelines, trustees' ongoing competence and performance will be evaluated from time to time.
Given these new requirements, it is only natural that trustees will be more reluctant to accept appointment as trustee and that they may require some inducement.
It must be presumed that in the past some trustees have accepted appointment for the opportunities it gave them to perhaps escape from their day-to-day routine by occasionally attending presentations, seminars and conferences organised by the service providers of the fund. The board of trustees must now devise a policy on gifts, which in the model draft, includes items such as books, bottles of wine, the payment of the costs of attending conferences and invitations to attend sporting, social or recreational events. These diversions may in future not be available to trustees in terms of the policy adopted by the fund.
Trustees must also declare their interests in terms of the new guidelines. Although aimed primarily at independent trustees, there are significant potential conflicts of interest for trustees who are appointed by their employers or elected by their associates. There have been a number of instances of such trustees in the past having acted for the benefit of service providers with whom they have connections rather than in the interests of the fund.
The guidelines suggest that board members should have sufficient capacity to deal diligently and thoroughly with their duties and responsibilities. It suggests that where possible, the employer should use its power to ensure that the board has as far as possible the necessary skills.
The guidelines suggest furthermore that the board of trustees should have subcommittees dealing with six specialist functions: audit and administration; investment; legal; communication and education; risk benefits dealing with gifts and disability benefits; and an actuarial subcommittee (in the case of a defined benefit funds). Obviously in the smaller funds there will not be the need to have all of these specialist functions and many of them could be outsourced to independent service providers for the requisite advice.
The fact that these specific areas have been targeted, points to the growing awareness that running a retirement fund requires skill and competence. Trustees generally do not have all of these skills and they will have to be trained. Training requires time and if employees take their duties and training seriously they will obviously necessarily have to forego some of the opportunities for advancement in their careers.
It is for these reasons that it is perhaps the right time to question whether trustees ought to be remunerated or compensated in some other way for accepting the onerous duties of being trustees?
Now that trustees are required to sign an acceptance of their appointment as trustees, the more diligent of them may perhaps decline appointment because of the sacrifices involved.
To avoid this consequence and in order to ensure the success of these good measures, it is to be hoped that funds and employers will recognise the contributions made by trustees and ensure that competent and diligent trustees are adequately rewarded.