Insider Business Club: solving the pensions crisis

What is the state of the FD-trustee relationship?

Mike Samuel, former FD and trustee, Rank Group and Unilever pension
funds

To be honest, I don’t think there was much of a relationship in the past. If
you go back to the 1990s, it was quite rare [for trustees] to engage with the
company in any way, and the company, in any event, was represented on the board
by their quite senior people.

These days that’s a real problem – not just in terms of the obvious conflict
of some event arising, but since trustees have a duty of trust with their fellow
trustees to share information. An FD will not be able to do that with some of
the longer-term strategies the company might be embarking on.

He puts himself at personal risk in that if things go pear-shaped the members
can say: ‘You were on the trustee board. Why didn’t you tell your colleagues the
company was planning to do this so they could react?’

That is a real dilemma, I think, for FDs and it is an underlying problem for
them. But I would say that that relationship is developing now generally between
the company and the trustee board in a positive way.

Can relations be improved?

Sheila Fazal, director, PwC

It is so important that there is a relationship of trust and openness.
Certain trustees are sceptical because they are worried that the company might
be hiding something.

When the trustees and the company are working effectively, they need to be
able to communicate effectively with the member- ship, because there is so much
pressure being put on trustees and the company through the membership. Often
there is a lack of understanding about what’s committed, about what the figures
are saying, about trustees’ responsibilities and so on.

The way that things can be managed, if not resolved, is through that dialogue
and through effective communication.

Is this perceived conflict for FDs on trustee boards leading to a bonanza
for advisers?

Greg Rodgers, MD, European Institutional Business Development,
SEI

The potential conflict that FDs and financial controllers are feeling is very
real. And we certainly have a number of people in litigious societies who would
simply go out and get their lawyer. Then everybody argues or negotiates their
problems in the court of law. The winners there are the lawyers.

To some extent the advisers are winning in that both sides are getting
advice. Certainly those advisers are to some extent incentivised to make sure
this process goes a certain way and goes on a bit longer than needed.

Negotiation can take on more negative connotations rather than being an open
collaborative process.
What we need is better communication, better execution and better monitoring.

Do trustees need a finance background?

Vernon Holdgate, director, Professional Trustee Capital
Cranfield

From a professional trustee point of view, the most requested skill set is in
relation to finance and investment. It is not legal skills, it’s not people with
a general consultancy type background, it’s investment people who are required.
That is a function of the need to understand and lead investment sub- committees
in dealing with the complexities of corporate treasury strategy hedging,
derivatives and so on.

A company’s primary duty is to its shareholders and it’s just not possible
for them to share all the information they may have in relation to their
business activities. They would be in breach of their duties and so the
relationship has to be defined by that.

It can still be open and transparent in important key areas, but you have to
understand where the lines are, and occasionally that can be misinterpreted.
Your primary interest as a trustee in the interest of the members.

The company is different. There will be areas where there is a natural gap,
but that does not need to be an area of animosity or conflict and an important
part of what a trustee does is make sure that doesn’t develop.

Chaired by Damian Wild

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