A trustee board with a conflict of interest
The Board was made up of four trustees, two from the company and two from the members; all employed by the same manufacturing company.
Trustees having a conflict of interest, real or perceived, is nothing new. If senior management are represented on the Trustee Board they will be mindful of the Company’s position about the cost of the scheme and how much management time it is taking up. Equally Member Nominated Trustees have their pension paid by the scheme, either now or at some point in the future. They may also be a trade union rep or may have an eye to keeping their job. The Pensions Regulator is clear that the management of conflicts of interest is key to good scheme governance.
Trustees having a conflict of interest, real or perceived, is nothing new. Here senior management were involved in discussions with the major shareholder about the potential sale of their holding and the subsequent sale of the Company.
We sat down with the Trustees to set out the importance of understanding potential conflicts of interests and that the general principle of how conflicts of duty can arise. We then considered who suffers from such a conflict and the implications for the trustees. Having considered this we then, with the assistance of the scheme legal advisers, developed a conflicts of interest protocol which gave guidance to trustees about what action they should take if they felt they either were or could become conflicted.
Most of this was achieved in a training session before the start of a trustee meeting. The protocol also indicates the potential actions which may be appropriate, such as stepping out of the meeting for the agenda item, remaining but not participating and the nuclear option of standing down – recognising that this is not a complete solution.
By ensuring that declaration of any potential or actual conflicts of interest was always the first topic on the trustees meeting agenda, the importance of this issue is reinforced at each trustee meeting. Having a professional trustee on the Board does not affect the conflicts which the other trustees may have, but does help by providing a sounding board to them. By keeping the conflicts protocol under regular review there is no chance that this becomes a governance issue that is ignored.
Conflicts, actual and potential, will always remain but by actively managing these, the Trustees are clear about what these are, and how they can be best managed.