Critical pension fund accountability bodies can improve involvement constituency
Should we invest our pension funds in weapons and houses or not? Should investments be climate neutral? And how much pension return do we want now or invest to benefit future pensioners? Complicated strategic questions on which accountability bodies of pension funds provide input to the board members on behalf of all of us. The new Dutch Wet toekomst pensioenen (Future Pensions Act) gives them the right to prior consultation on the transfer of our pension capital to the new system. Utrecht University has investigated the functioning of these accountability bodies and observes they perform satisfactorily, but also sees clear points for improvement.
Points for improvement on diversity, the advisory role and agenda setting
The accountability body of a pension fund advises the board on request and unrequested on intended policy. How representative, capable and effective are the accountability bodies, and do they inform and consult their constituencies sufficiently? Presidents, secretaries and board members of the accountability bodies are predominantly satisfied with how the accountability bodies function. However, there are points for improvement on diversity, the advisory role and the agenda setting. This is shown in research carried out by researchers of the Utrecht University School of Governance (USG) at the request of the Monitoringcommissie Code Pensioenfondsen (Monitoring Committee Pension Fund Code) into the functioning of pension funds' accountability bodies and stakeholders' bodies.
General results
The most important research findings are about the composition of the accountability bodies as well as how they carry out and perceive their tasks:
- First of all, there is little diversity among members of accountability bodies in terms of age groups, sexes and educational levels. However, there is sufficient knowledge and expertise within the accountability bodies.
- There is no need for formal test frameworks and information protocols, as these can raise the threshold when recruiting new members. Approximately a third of the pension funds currently work with these.
- When it comes to how accountability bodies perceive their tasks, they take on more of a reacting role than actively setting the agenda. The board members of pension funds rate their accountability bodies highly on effectiveness. The accountability bodies are well prepared for their primary task, although some would like more stability in their roles.
As researchers, we were particularly struck by how little diverse the composition of accountability bodies is and how limited they consult constituencies. The introduction of the Future Pensions Act has raised the question of how balanced the representation of different stakeholder groups is,
says Meike Bokhorst, project leader of the study.
As expected, accountability bodies are more reactive than agenda-setting and more focused on demanding accountability than thinking along with the director. This raises the question of whether the current forms of accountability and employee participation are still the most appropriate in the long term or whether they should be changed. Accountability bodies could at least consult pension fund members annually and, based on this, set their own agenda for discussion with the director more often.
Research Team
The research team consisted of: Meike Bokhorst (project leader), Carmen Dymanus, Chris Noij with assistance from Sjors Overman.
More information
Would you like to know more about the report Functioneren van verantwoordingsorganen bij pensioenfondsen? Please contact the project leader, Meike Bokhorst: m.a.bokhorst@uu.nl.