The role of the Elected Trustee

The Trustee Board of which I am a member has fourteen members, including the Chairman, of which seven are nominated to serve by the Sponsor and seven are elected from various member constituencies. Of the seven Company Nominated Directors four are Shell employees and three Pensioners. Of the seven Member Nominated Directors four are directly elected by the 6,600 employees in the fund and three are elected from the 38,000 Pensioner (and Deferred Pensioner) members - one indirectly and two via a ballot of all Pensioners. I mention these details to show that there is always likely to be a fair diversity of types of Trustee but also to highlight that only two of us can claim to have been chosen directly by the 85% of our Fund’s members who are pensioners – although in total six of us are pensioners and can perhaps be seen to relate closely to this community. Similarly the eight employee members perhaps naturally associate with those still in employment. In making this analysis I can hear the voices of the Pensions lawyer and the Fund’s managers over my shoulder. “You are not a delegate of the Pensioners representing them – you must at all times act in the interests of the beneficiaries as a whole”! This of course is true and forefend the thought that I should be partial to one member sub-group over another!

I have now been a Trustee for a year and can say that the Board members who are my colleagues honour to the letter their legal duty to put members interests first whatever their backgrounds and whatever “constituency” they come from. They are also collegiate with one another and whilst there are some obvious differences between, for example, the Pensioner Directors and the Employee Directors these rarely come to the surface in a negative way. It is also pleasing to see that there is no “them and us” divide between the rather senior Company Nominated employee Directors and the rest of us. I am aware that other funds are not so fortunate – one elected member of a major fund told me that he and his fellow elected members have pre-meetings before Boards to agree their position on issues and to plot together against what he called the “company apparatchiks and puppets”!

When I meet fellow Shell Pensioners at various functions I stress to them that although they elected me the law does not permit me only to argue in their interest. But I also say that, so far anyway, this has not been a problem. We have not had an issue on which a decision one way would favour employee members to the detriment of pensioner members – or vice versa - and I think that it is unlikely that we will. So generally what is in the interest of Pensioners is either also in the interest of employees or at the very least is neutral to them. Given this, and whilst I am watchful of the risks of not being even-handed, I naturally think particularly of my Pensioner constituency when matters are under discussion.

The principle that some members of Pension Fund boards should be elected is not universal and some very large Funds have Boards that only appoint and/or select their members. In my opinion if we are privileged to live in a country which has a pluralist, democratic system then election of those that govern us is a sine qua non. I would not argue that all Trustees should be elected or that those who are chosen by their peers have greater legitimacy than those who have been selected (or those for whom being a Trustee comes with their job). The key to having a successful Trustee Board is to have diversity and openness of discourse. Unlike in the formal business environment from which most Board members come there is far less hierarchy and a far greater need to reach a consensus than in a world in which the buck stops with the man in charge. So whilst elections for positions in businesses would be inconceivable elections to Trustee boards seems at the very least highly desirable. In any enterprise creative tension is healthy and I see no reason why behind the closed doors of a Trustee Board meeting there shouldn’t always be frank and fearless exchanges of views. That is more likely to come if some of the Board members have been chosen by their peers.

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age

The Pensioner as stakeholder (2)

Many Companies have embraced the stakeholder society – at least in their public statements and their PR. As BT puts it: “For most companies the three most vital stakeholder groups are Customers, Employees and Shareholders” – most other businesses have something similar in their “Corporate Social Responsibility” statements. Some add “Local communities” to this list and others include “Suppliers” and “Government” - but I have yet to see a Company saying that its Pensioners are stakeholders. Why not?

Pensioners are, of course, former employees but do we surrender our stakeholder status when we retire – or do we just move from being a stakeholder in a company to being a stakeholder in that company’s Pension Fund? And is there more to our connection with our former employer than “just” being a beneficiary of its Pension Fund – do we have rights and responsibilities which go beyond the right to a Pension? As always I am not looking for a lawyers’ answer to this question – no doubt the law would say that once we leave the employ of an organisation we surrender any legal interest in that entity – pensions apart. What I am seeking to define is the nature of what actually is quite a complex post-employment relationship - and perhaps which goes rather deeper than many employers and Pensioners would believe.

A Defined Benefit pension, as defined in its Trust Deed, is deferred salary – essentially part of the compensation package that we enjoyed as an employee. Given this it is at least arguable that in the same way that an employer had a duty of care beyond “just” compensation when we were working they also have similar duties when we stop. An employee with problems or special needs can expect that his employer will take an interest and help. Is there any reason why this should cease on retirement? In my case Shell facilitates and funds a “Pensioners’ Association” which provides support to retired staff and in addition there is a “Shell Pensioners Benevolent Association”, a registered charity, which makes grants to pensioners in need. Finally Shell also provides a team of “Pensioner Liaison Representatives”, pensioners themselves, who call on all Shell pensioners every year and provide help to them when necessary.

If the moral principle is established that a Company has a duty to Pensioners beyond that of ensuring that the Pension Fund is funded properly, and beyond its legal obligations, where should the line be drawn? The Pensioners of any large employer are not a homogenous group – any more than they were all the same when they were employees. In the employment years benefits packages differed widely with high responsibilities and specialised skills generating far higher incomes than was the case for those in the more mundane operational jobs - and for a final salary based DB scheme the effect of this continues into retirement. But in retirement needs differ and for many there is absolutely no real guarantee that received pensions will continue to be sufficient to meet their needs. A Pensioner who retired twenty years ago on a pension for which the final salary driver was modest may find himself in real difficulties today – even allowing for the fact that the State Pension augments his occupational pension. If a mismatch between income offered and employee need had existed in a pensioner’s employment years then one way or another it would have been corrected. A Union or staff association would have pressed for increased remuneration for underpaid employees or the company itself would have realised that it needed to offer more in order to retain/attract staff. But beyond retirement this no longer applies. This is where the concept of Pensioner as stakeholder becomes useful.

The benefits provided by a Company to its stakeholders often go beyond the legal minimum. In the case of the Pensioner as stakeholder it could be argued that the Company has a particular moral duty to ensure that pensioners in need are cared for. This may include the provision of benevolence and practical and social support. But I would argue that the responsibility goes beyond this and that it includes an obligation to correct matters structurally when it can be shown that the cumulative effect of pension rises not keeping up with real pensioner inflation over time has inevitably hit hardest at older pensioners with smaller pensions. In such cases companies may need to do more. For example a one-off Pension Fund contribution by a sponsor specifically to boost the pensions of poorer pensioners, which then creates a new and more satisfactory platform on which future index-based increments will be based, could well be justified in such situations.

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age

Why Member communications in DB schemes matters

Why Member communications in DB schemes matters - and how to know if you have achieved your communications objectives

It is something of a cliché to say that we live in a world of communications overload with all of us bombarded daily with a huge variety of messages on an ever increasing number of media. Sometimes, as with social media like Twitter or Facebook, we choose to participate (or not) but even if we remain aloof from these fashionable clubs we still have to wrestle with a superfluity of information, commercial offers and bewildering choices via more traditional channels. Given this media explosion those of us connected with the world of Pension Funds can perhaps reassure ourselves that we are much more modest in our communications activities with Fund members. This is changing with new disclosure regulations coming into force and certainly the world of communications for DC schemes is becoming more complex and challenging. But for DB schemes it is different. The average Pensioner member of a Defined Benefit Pension scheme will perhaps get one formal communication a year from the Fund plus, if he chooses to ask for it, a copy of the Fund’s annual report and other standard material. Actives will also get regular statements which record their individual pension position plus, perhaps, invitations to subscribe to AVCs. In addition some funds have websites and webcasts – mainly for Actives - but that’s about it. Is this sufficient and should DB schemes’ Funds be doing more – and how do they know if their communications are achieving the Fund’s objectives?

One of the core principles of communications can be summarised in the shorthand “Stimulus and Response”. In short every communication that anyone issues requires a response and should be designed to elicit that response. So, for example, an advertisement from a Motor Car manufacturer (the stimulus) will generally be seeking the response from the target group it is aimed at of being put on the short list of possible cars that the purchaser will consider. Responses can also be more passive and subliminal. Corporate Advertising responses are usually measured over time to see if a company’s reputation among its target group members has risen as a result of the advertising. The key word here is “measured” – where communications are required to elicit something other than a purchase (where hard sales data will tell you if you are succeeding) then you have to find a measurement mechanism to tell you if you are being successful.

Most communications with members of DB schemes are not designed to achieve an action response – i.e. the Fund members are not usually required by the Fund to do anything directly as a result of receiving the communication. Funds communicate with their members to inform them and to reassure them – especially to try and demonstrate to them that the Trustees are protecting their interests. There is also, of course, the statutory responsibility that all Funds have to ensure that key data about the Fund, and any material changes that have been made to the Fund, are properly communicated. So how can Trustees know whether their communications are being effective – in other words that the stimulus that the communications represent are achieving the desired response? The absolute necessity here is to measure this and to track it over time. Two research methodologies can help us. Qualitative Research digs deep with members of the target group to identify their behaviour and opinions – one-to-one interviews and focus groups are typical ways of doing this. The respondents are selected randomly from the population but it is common to have different groups for each subset of the population that are of interest – different age groups or genders for Pensioners for example. Qualitative Research gives you a feel for attitudes and opinions but it does not give you statistically significant results. For this you need Quantitative Research in which samples are much larger but which ask less potentially discursive questions. A sample size of around 400 might be typical in a DB scheme which wants to know the effect of communications on its say 20,000 Pensioner members.

So after creating the stimulus we measure the response and the final step is to complete the feedback loop by refining the communication in future. So, for example, if one of the communications objectives is to try and ensure that all Fund members are aware of the “funding ratio” of their fund and why it is important then Quantitative Research will tell you statistically whether you are succeeding and Qualitative Research will help you understand why – and help you improve your communications next time around.

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age

The Pensioner as stakeholder

Little more than a year ago my interest in the subject of pensions was confined to a natural concern about my own and how to live comfortably on it – now and in the future. Then the news emerged that I had been successful in the election held amongst the 38,000 Shell pensioners in the UK to become one of the two directly elected (by pensioners) Member Nominated Trustee Directors (MND) of the £11.4billion Shell Contributory Pension Fund (SCPF). Given that I cannot claim to have any knowledge of, nor experience in, the arcane world of pensions you may wonder why I stood for election and, perhaps even more, why the Shell pensioner community chose me ahead of the other 22 candidates. The answer, I think, is that I firmly believe that pensioners are stakeholders in the enterprises that provide their pensions – both the funds themselves and the companies that sponsor them. And stakeholders of any organisation, and especially those of powerful multinational corporations, need articulate and determined representatives to protect their interests. I undertook to try to do this and the electorate put their trust in me that I would – so how is it going?

From the start the trustee training that I received, whether provided internally or by external agencies like the NAPF, emphasised the extent to which everyone in the world of Pensions, from the Regulator to professional bodies to corporate sponsors and the schemes themselves, was concerned that all trustees have adequate “knowledge and understanding”. Fortunately it was made clear to me that I was not expected to become a Pensions expert or to start practicing any of the many disciplines that operate in and around pension funds - and a good job too as many of these relate to the Law and to Financial Management neither of which would be my specialist subject on Mastermind! In my 37 years with Shell companies around the world I was fortunately never responsible for providing legal advice or for compiling statements of accounts. But as a member of various management teams over the years I did contribute, I think, beyond my own expertise areas of marketing and brand and communications. I was never shy about expressing an opinion nor nervous of asking the stupid question – characteristics which, I hope, will stand me in good stead in my Trustee role.

I am, then, an amateur trustee with no pretensions that in time I will become a professional one. I will continue to do my best, as the law requires me to, to become more knowledgeable about pension matters and there is plenty of help available to enable me to do this. Fortunately other directors of the SCPF Trust are experts in the various pension disciplines – as, of course, are those in our Trustee Services Unit, in Shell’s Investment Management company and in our various advisor agencies. The amateur trustee, like all the other trustees, has a statutory duty to represent all members at all times - but unlike the professionals he should be able to question or challenge without fear of revealing ignorance on matters on which he is supposed to be informed. Clearly you don’t want to be asking the same daft question too many times – but you should not be afraid of asking it in the first place. The Shell scheme permits any member to stand for election to the Trustee board from either the Actives or the Pensioner communities. I am biased, but I do think that this system is much preferable to that operated by some other large schemes where prospective MNDs put their names forward and are then chosen, in a selection process, by existing Board members.

A little under a year into my trustee role I am hugely enjoying it which, I hope, means that I will be able to contribute more effectively than if it was a chore. The Shell fund, a DB scheme which is still open to new entrants (albeit with slightly reduced benefits) and which is fully funded with a small surplus is in a comparatively good position. But legislative changes and social and political pressures are going to impinge one way or another on our fund and its members and the fact that the world of pensions is so much in the spotlight adds to the significance and to the challenge of the trustee role - we live in interesting times!

Paddy Briggs is a Member Nominated Trustee Director of the Shell Contributory Pension Fund. He writes in a personal capacity and the views he expresses are his own.

© Pensions Age