In November the International Centre for Pension Management at the Rotman School, University of Toronto will launch its board effectiveness program, which director Keith Ambachtsheer hopes will help overcome the dysfunctionality of pension fund boards – which have a desire to implement rather than oversee.
The governance function in the pension world is often dysfunctional, according to director of ICPM, Keith Ambachtsheer (pictured), and to put his money where his mouth is, the Rotman School at the University of Toronto will launch a board effectiveness program for pension funds this November.
The program will ask attendees to submit in advance the top three burning issues their boards face, and those answers will then help form a practical guide for attendees.
The program will look at the functionality of boards, examining when they get stuck and why, as well as the right way for a board to act around strategy, planning and execution.
“There is often not a clear distinction of what the board does in our space. This comes from the history of trustees having personal responsibility which has translated into ‘I need to know everything’, this is not possible and dysfunctional.”
“The board should have an oversight function not implementation.”
Ambachtsheer says it’s all just “Druckersism” referring to the work of Peter Drucker who is often quoted as the man who invented management.
“The role of the board, in any industry and company, should be oversight, asking questions of why we’re on track to achieving our mission, and have the competence to understand the answers,” he says. “Pension fund boards are the same as any other organisational board.”
The board governance program has been broadly offered by the Rotman School since 2003 and more than 1500 individuals have gone through the program.
This program has been tweaked to make the content pension-fund specific, and uniquely will have an international participation, which Ambachtsheer says will bring together people “who do the same thing and understand the value of people networking with each other”.
Broadly speaking Ambachtsheer says there are two ways to put a board together. The first is that board members are representative of a particular group; and the second is the Drucker model where the board must understand enough about the organisation it is governing to ask the right questions.
But he says the right board composition is not either one of these, it’s both.
Ambachtsheer points to the example of Ontario Teachers Pension Plan as a case study of good governance. When Claude Lamoureux was approached to be its founding chief executive there was a greenfield opportunity to get it right, he says.
When the pension fund’s first chair, Gerry Bouey, the retired governor of the Bank of Canada, approached Lamoureux for the position, he said he would consider it given a number of conditions, so the story goes.
He wanted to be part of an organisation that was at arm’s length, had a grasp of governance matters, sensible investment beliefs, the right compensation model and mix of directors.
Ontario teachers and the Ontario government agreed to these demands, and to the kinds of skill sets required from people to sit on the board.
“However you measure OTPP they shoot the lights out, because they got the model right at the beginning,” he says.
Ambachtsheer is adamant that to attract the required professionalism a board demands, its members must be paid, which would be in the order of $30,000 to $60,000 depending on the committee work.
But this is not to say that these “professionals” aren’t still representatives of certain groups of the fund’s beneficiaries.
“Board members should be professional people. They can still be selected by representative groups, such as unions or employees, but it is a valuable job and needs to be paid to reflect that.”
For information about the governance program, click here.