Good Governance  - How to get there: A PLSA discussion paper

This PLSA discussion paper, looks at how to raise the standards of scheme governance and regulate governance bodies more efficiently. 

The paper sets out the view that it is the ‘inputs’ that determine the quality of scheme governance. These inputs are chiefly concerned with the collective qualities of the people who populate governance bodies and the support they are able to draw upon. Key characteristics of effective boards or committees include:

• collective knowledge of the technical areas relevant to pension fund administration, on issues including investment, legal and actuarial matters;
• more general skills, such as an ability to communicate effectively and commercial acumen when dealing with external advisers;
• cognitive diversity, through board or committee members with a range of different backgrounds and perspectives;
• access to executive support for the day-today running of the scheme, enabling the governance body to concentrate on key strategic decisions

Our discussion paper argues that governance bodies with these characteristics will take good decisions, increasing the likelihood of good outcomes for scheme members. Therefore, The Pensions Regulator (TPR) should concentrate on ensuring that individuals who are appointed to boards and committees have the appropriate knowledge and experience. This contrasts with the current approach, focused on mandating particular individual processes that schemes must undertake, resulting in a confusing array of prescriptive codes and guidelines for schemes to get to grips with. These regulations have failed to raise standards to the necessary level. Our paper suggests that a focus on the most important ingredient of good governance – the people that provide it – would be a better way forward.

We hope that you will find the paper to be of interest – for any further information on our work in this area, please contact Luke Hildyard, Policy Lead for Governance and Stewardship on [email protected]