Think Tank Session #4
On Pension Board Reporting
The Decumulation Institute organized its third Think Tank Session in November 2015. Participants included Michael Peskin, former Managing Director and Head of Pensions at Morgan Stanley, NY; Malcolm Hamilton; Don Ezra, Bill Chinery, fund governance leader Tom Iannucci; Paul Purcell; and John T. Por.
The discussions covered the subject of pension board reporting and meetings.
- The participants have been involved in pension boards for decades either as advisors to pension boards or being pension trustees themselves. By observations and actual hands on experience, they have found that reports to the board of trustees often exhibit the following issues regarding clarity, relevance, organization and time management.
- Huge amounts of information were in a format that is difficult to digest for non-pension professionals
- Lack of spelling out consequences of the information provided
- Excessive detail having little to do with the role of the pension trustee, often distracting from vital information
- Little distinction between the needs of operating management and those of the pension board trustees, as its prepared by functional pension staff
- Pension reporting systems vary widely so not one uniform system could be spelled out. However, reporting systems should address certain criteria that could be used in evaluating and adjust current practices
- Time Management
- Pension reports were often found to be too long, required too much time and effort of board members with no palatable outcome, and did not respect their knowledge base.
- The ensuing discussions were focused on spelling out a set of Principles of Effective Pension Board Reporting. The group suggested the following:
- Keep it Clear
- Information items and required actions should be clearly separated
- Information should be put in proper, comparative context so that its meaning is straightforward
- The report should be prepared in a format with charts/ graphs and language board members can easily understand with content that is within the expected understanding and knowledge of board members
- Keep it Relevant
- Stay on topic, and within the board’s authority and mission statement
- The meeting should be in keeping with the board’s tasks as stated in charters or delegation documents
- Meet the specified and fiduciary metrics approved by the board regarding supervision over delegated tasks.
- Report on significant organizational undertakings that have budgetary, reputation and/or risk consequences.
- Be Organized
- Maintain consistency in content and format over time
- Report undertakings within a relevant and timely manner, regardless of their success
- The report should be guided by a board approved policy spelling out the frequency of scheduled reviews along with the appropriate criteria
- Respect People’s Time
- The report’s volume and amount of details should be in line with the time commitment that can be reasonably expected from a board member gainfully employed outside the board
- Its preparation ought not to be overly taxing management’s time and effort
- Language should be sparse, free of jargon, vague statements and self-congratulation.