Pension schemes have often been at the forefront of investor initiatives to encourage more diversity on the boards of the companies in which they invest, recognising the fact that diverse boards make better decisions and are less prone to group-think and other behavioural biases.
Yet what is sauce for the goose is also sauce for the gander. Pension scheme boards might be demanding that investee companies and, increasingly, their investment service providers make more efforts to recruit and retain diverse talent, but they also need to take a close look in the mirror. 83% of trustee boards are male and only 3% of trustees are under 40, so the pensions sector has some way to go.
With auto-enrolment bringing in a new wave of younger savers, and increased industry focus on those segments of the population which are “under-pensioned” such as women and ethnic minorities, it’s more important than ever that schemes are better able to reflect and respond to savers’ concerns. Having a diverse representation of backgrounds and experience at every level of the pensions sector and in particular on trustee boards, is vital to ensuring this.
This is why it was great news that The Pensions Regulator (TPR), in its recent consultation on The Future of Trusteeship and Governance, specifically highlighted trustee diversity. The consultation provoked a very welcome discussion within the industry, building upon the momentum already provided by initiatives such as The Diversity Project, NextGenNow and the Young Pension Trustees Network.
In its response, the PLSA expressed strong support for a new regulatory requirement to be applied to all schemes – regardless of shape or size – to report to the regulator and publicly on what steps they are taking to work towards greater diversity on their trustee boards and, if they are not, to explain why doing so is not relevant to the scheme or scheme membership.
From our conversations with members, we know that there has been a groundswell of activity and there is a clear need to share good practice.
The PLSA also highlighted the role of industry in providing greater practical guidance for schemes in recruiting and attracting diverse talent onto trustee boards. We undertook research with Winmark in 2018 to explore and highlight best practice from schemes in this space. Interesting initiatives already being undertaken by trustee boards included:
- Undertaking psychometric testing both for chair candidates and potential trustees to evaluate softer skills and how a particular candidate might complement the board;
- Organising ‘talent pools’ designed for applicants which just miss out in the recruitment process – within these pools, candidates would be trained as if they were a trustees so they were in a position of greater strength for the next opportunity;
- Creating ‘pension ambassadors’ and encouraging existing trustees to communicate with their peers directly and face-to-face.
In 2020, the PLSA will be looking to provide further practical, step-by-step guidance and events for scheme trustee boards to help them become more diverse.
We will also be continuing to do our bit to ‘walk the walk’ on diversity, through working on our own diversity and inclusion and seeking to achieve our 50:50 gender target across all the speakers and panels at our high-profile conferences, and using our voice to amplify the excellent work of others in this space.
We welcome the opportunity to work with every part of the trustee universe to achieve real change, from lay and professional trustees to consultants and advisers. If you would like to find out more about our asset owners workstream, or any of the other work the PLSA does in this space, please do get in touch.