UK - Scheme members should be in a position to challenge the executive boards of companies in which their pension fund invests, delegates at the NAPF Edinburgh investment conference heard.
Gartmore Investment Management head of corporate governance Tony Little said boards were currently “isolated” from companies’ real owners – the scheme members.
And he said this “isolation” meant non-executive directors were necessary to bring an independent overview to the running of the board – challenging the directors on important decisions and chairing important board sub-committees.
Little said: “Committees of the board should be able to bring independent oversight to the audit function and should be able to resolve the conflicts of interest that inevitably arise over issues such as remuneration.”
Inbucon Meis consultant Peter Jauhal added that non-executive directors could have an influence on how much top executives were paid.
“Our analysis shows that, all else being equal, the better the board structure, the lower the pay.”
Jauhal said: “This is important because when the chief executive officer is also the chairman, non-executives are less in touch.
“This is because the chief executive sets the agenda and manages the information that is distributed, while the non-executives who were previously executives tend to be more loyal to the management.”
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.