The effectiveness of a board is not solely related to knowledge and understanding. Personalities are also key. If one person is too dominant this could make the board ineffective. Other potential problems include trustees who are too scared to make decisions. Or the board not being suitably diverse. Or some trustees having insufficient time to be able to prepare properly for meetings. A trustee board may be made up of good people but it might not be effective at making appropriate decisions.
When appointing/selecting trustees it must be remembered that they are legally required to be fit and proper to be a trustee. They must also be competent. The Pensions Regulator expects trustees to have integrity and act honestly. Once it has been established that these basic essentials have been met, the next question is whether a candidate is a good fit for the trustee body. Ideally a trustee board would be well-balanced and comprised of a diverse mix of backgrounds, experience, skills, demographics and personalities.
The Pensions Regulator feels that chairs should consider conducting an annual evaluation of the board’s effectiveness (amongst other things), referring to the objectives they set in their business plan.
Trustee effectiveness is not something that can be reviewed once and then forgotten about. It is an ongoing process, as illustrated below:
Find out more about our approach to trustee effectiveness reviews and how we can help you get into the right governance mind-set to address the issues associated with The Pensions Regulator's new Code of Practice.Find out more