Call for Action to Ensure Trustee Independence

by David Johnson in The Financial Times 27/09/09

EMI, the music company, last month was reported to have ousted the chairman of its pension scheme’s board of trustees after he had requested the company add £170m (€194m, $278m) to the pension scheme. The move highlights a fundamental flaw in the governance of UK pension schemes.

The interests of the members of the UK’s final salary schemes are meant to be protected by that scheme’s board of trustees. However, often they have very little real independence from the employer that is meant to stand behind the pension scheme and guarantee its good health.

Either their independence is restricted by the constitution of the pension fund that allows the sponsoring company to dismiss trustees. Or trustee boards can be headed by trustees who are so weighed down with conflicts of interest they cannot possibly be judged to be independent.

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