Member nominated trustees – are selection panels the only choice to make the right choice?
Being a trustee is hard. And it’s getting harder. So it’s more important than ever to find the right people for the job in terms of skills, experience, motivation and commitment.
However, unless they bite the bullet and move to a sole professional trustee, most schemes will need to ensure that at least a third of the trustee board is “member-nominated”. This means that they must be –
- nominated as a result of a process in which at least active and pensioner members (or a representative organisation) are eligible to participate; and
- selected as a result of a process which involves some or all of the members of the scheme.
The traditional Member Nominated Trustee (MNT) election
In the past, schemes generally held an election so members could vote for their preferred candidate. This approach has some very obvious advantages. It directly involves a wide group of members, it is easy to operate, and assuming you don’t get into concerns about election fraud, it’s difficult to argue with the result. The most votes wins. Simple. However, as with any election, there is the age old argument as to whether the winner is the most popular candidate, rather than the best candidate.
The rise of the selection panel
Largely as a result of this concern, over the last decade we have seen a significant shift towards MNTs being selected by a panel. Similar to a standard job application, members put themselves forward by completing an application form, some applicants are invited to an interview and then a small group of people who are familiar with what the role demands chooses the individual best suited for it. The interview process also gives candidates greater opportunity to find out more about the role in advance, reducing the risk of a new MNT resigning shortly after appointment because it was not what they had expected.
Raising the bar for trustees
With the Pensions Regulator’s new single code expected to re-emphasise the need for trustee boards to assess the fitness and propriety of candidates and seek to address any gaps in skills and competencies across the board when selecting new trustees, as well as a growing focus on diversity and inclusion, trustees might now start to ask whether a traditional MNT election process can still work?
Could we now see a further (or potentially even a complete?) shift towards selection panels so schemes can ensure that they meet the Regulator’s expectations and have a board which is fully up to the task?
Even where trustees feel that a member election is still a vital part of member engagement and the tradition and culture of the scheme, does it make sense to now introduce a selection stage ahead of the election so that you can be confident that your new MNT will be fit for the job, whichever choice the members make?
Getting your selection panel process right
Using a selection panel should make it easier to select the best candidate but only if you do it right.
Whether considering using a selection panel for the first time, or preparing to run a new process, trustees should think carefully about –
- How do we get good candidates to apply?
A selection panel can clearly only choose from the candidates who actually come forward. Getting the communications right will be key to increase the chances of getting a good mix of quality candidates. How do you describe/present the role? Is there anything that might potentially put off candidates with particular backgrounds?
- Who should be on the panel?
By law, the panel must include at least some scheme members. This is fairly straightforward if some of the current trustees are members but could be trickier for some closed schemes. Beyond that it is for each board to decide who is best placed to make the selection. It is certainly helpful to have a panel who is familiar with the role and the make-up of the trustee board. Can you also ensure the panel represents a diversity of perspectives?
- How will the panel assess the candidates?
The process needs to be fair, proportionate and transparent and enable the panel to assess properly the candidates and make an informed choice. This generally means –
- assessing individuals by reference to a list of relevant skills, competencies and experience
- having standard questions/discussion topics
- using a consistent approach to assessing/scoring candidates
- giving each candidate an opportunity to ask questions
However it’s a tricky balance to strike between having a process which is focussed on skills, competencies and experience but which doesn’t risk trustee boards overlooking or putting off good candidates who may be new to the world of trusteeship and pensions but would have a lot to bring to the board in terms of a broader skillset, fresh ideas and a different perspective.
- How do we reassure members that the process is fair?
There will always be a risk that someone might challenge a selection panel’s decision on the basis that it wasn’t fair, or that it was a foregone conclusion. However, having a well-structured and documented process and being transparent about why using a panel is in members’ interests and how the process works should help to increase confidence and ensure everyone knows what to expect. If you ensure candidates going through the process have a good experience, they will hopefully advocate the process and may be prepared to stand again if they are unsuccessful first time around.
Operating a good selection panel process clearly takes a lot more thought than running a simple ballot. But experience shows that putting the effort into both the planning and the management of the process is definitely worth it. And sometimes when the goal posts have been moved by this much, there seems little choice but to change tactics.