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Fair Pensions
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Seminar Series 2010

Seminar Series

Seminar 1: Identifying key themes

Monday 10 May, 2010 1.45pm-5pm
Professor Keith Johnson, University of Wisconsin Law School

In this Seminar, Professor Keith Johnson gave a broad overview of the historical development of fiduciary duty. His paper examined some key characteristics of the contemporary context in which pension investment is undertaken and the problems this poses given the prevailing interpretation of fiduciary duties. It went on to consider some possible approaches to resolving these problems.

The ensuing discussion identified some key challenges for consideration in the remaining seminars, including the need to embed fiduciary responsibilities:

  • throughout the investment chain, in a context where trustees are making fewer and fewer investment decisions;
  • across pension funds, in a context where many small schemes rely heavily on external advice and have limited governance capabilities;
  • across the investment community, including both passive and active investors, in a context where short-termism and herding behaviour create challenges for investors whose end beneficiaries have long-term horizons

The role of trustees, and the difficulty of balancing trustee knowledge and expertise with the independence of mind that is so vital to ensuring good decision-making and constructive challenge, was identified as a key problem.

Speaker Biography | Full Paper | Summary

Seminar 2: Fiduciaries redefined & prudence redefined

Thursday 10 June, 2010 1.45pm-5pm
Paul Watchman (author of the landmark Freshfields legal opinion)

This Seminar considered whether the time has come to impose full fiduciary duties upon fund managers, investment consultants, and insurance companies in addition to trustees. It was noted that the degree to which trustees delegate responsibility for investment decisions made the existing framework for fiduciary duty outdated. A key point of discussion was the need to distinguish between the different duties to which fiduciaries are subject, identifying those where extension would be appropriate and those where it would not.

The seminar went on to examine the practical and legal barriers to the adoption of a redefined view of prudence which takes account of Environmental, Social and Governance factors. One of the key barriers identified was the cultural norms and misconceptions which lead to much greater conservatism about ESG issues than is applied to other investment decisions, such as the choice between active and passive management. A range of solutions were debated, including statutory clarification, improved transparency and reporting, better training and support for member-nominated trustees and promotion of the UNPRI.

Agenda | Speaker Biography | Full Paper | Summary

Seminar 3 - Best Interests Redefined

Friday 16th July, 2010 1.45pm-5pm
Charles Scanlan (retired Head of Pensions at Simmons and Simmons)

Seminar 3 considered whether fiduciary duty should be amended: (i) to allow those to whom the duties are owed to play a greater role in the determination of their best interests; and/or (ii) so that the concept of "best interests" be expanded beyond the current definition of "financial returns" to incorporate a more balanced set of interests. The seminar distinguished between the possible adoption by fiduciaries of an ‘ethical' investment policy that takes into account members' expressed or implied moral preferences and the adoption of an investment policy that incorporates the trustees' assessment of the beneficiaries' wider ‘best interests'.

Agenda | Speaker Biography | Short Paper | Full Paper | Summary

Seminar 4 - Beneficiaries Redefined

Thursday 16 September, 2010 1.45pm-5pm
David Howarth, University of Cambridge*

According to the view which will be explored in Seminar 4, the sheer scale and influence of invested pension savings on the global economy means that it is no longer appropriate for fiduciaries to act solely in the interests of their beneficiaries without some consideration being given to other stakeholders. This conceptualisation of fiduciary duty would require trustees/fiduciaries to focus on the potential impacts of their decisions upon, for example, capital market stability, environmental standards and other societal stakeholders.

There are clearly different levels to which such stakeholder thinking could be taken. One possible approach would see continued preservation of the primary interests of beneficiaries - rather as Section 172 of the Companies Act preserves the primacy of shareholders whilst requiring company directors to ‘have regard to' other stakeholders. A more radical approach would, in some circumstances, allow the interests of beneficiaries to be subordinated to those of other stakeholders, for example where such stakeholders could be at risk of substantial harm.

* Due to unforeseen circumstances, Professor Benjamin Richardson has had to cancel his presentation at this seminar. David Howarth, Reader in Law at the University of Cambridge and former Member of Parliament, has kindly agreed to take his place.

Agenda | Speaker Biography |Full Paper | Summary

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