The recruitment and selection of pension trustees: an integrative approach

• Published date: 01 July 2014
• DOI: http://doi.org/10.1111/1748-8583.12012
• Author: Anil Verma,Susan Sayce,Johanna Weststar
• Date: 01 July 2014

The recruitment and selection of pension trustees:

an integrative approach

Susan Sayce, Norwich Business School, University of East Anglia

Johanna Weststar, Dan Program in Management and Organizational Studies,

Western University

Anil Verma, Rotman School of Management & Centre for Industrial Relations and

Human Resources, University of Toronto

Human Resource Management Journal, Vol 24, no 3, 2014, pages 307–322

The role of a pension trustee is significant, which makes the recruitment and selection of labour trustees

an important issue. In this article, we examine and combine aspects of two approaches to recruitment

and selection: the political nomination model and the more professional HRM approach. We argue that

an integrative approach would acknowledge the political, regulatory and organisational context while

incorporating valid selection criteria such as domain-specific skills and performance on the job. Such an

integrated process can help trade unions in filling labour trustee positions with talented individuals who

are more likely to be effective in achieving labour’s goals in pension governance.

Contact: Dr Susan Sayce, Norwich Business School, University of East Anglia, Norwich NR4

7TJ, UK. Email: s.sayce@uea.ac.uk

INTRODUCTION

Adiscernible worldwide trend towards giving pension plan members greater say in

pension governance has emerged in the last half-century. In the context of unionised

workplaces, this has led to more union trustees on pension boards. The increasing

presence of employee representatives on pension boards has attracted some scrutiny of their

role and effectiveness. Although research on this topic is still lacking, it has been found that

labour (or employee) representatives on pension boards may not be fully participative members

of the board (Weststar and Verma, 2007; Verma and Weststar, 2011).

The role of trustees on a pension board is challenging at the best of times; shifting

demographics, turbulent markets, heightened economic pressures and movements in support

of alternative investment strategies further complicate the landscape. Labour trustees are not

often experts in pension governance, investment policy or actuarial science, and they must

acquire a degree of functional competence to operate on the board. Moreover, they experience

a heightened political environment because of their actual or perceived union allegiance.

Labour trustees must negotiate the tension between their fiduciary duty to the plan and their

duty of representing the values in their own trade union. Therefore, trustees experience a

degree of both role conflict and role ambiguity (Rizzo et al., 1970).

All of the above make the recruitment and selection of the right candidate fraught with

problems. This article examines two alternate approaches to the recruitment and selection of

labour trustees: the nomination approach, which is more political in nature, and the more

professional HRM approach. The nomination approach emphasises the overall political goals of

the organisation (here, the union) and the nominated individuals’ political connections to the

union leadership. In contrast, the HRM approach emphasises development of a job description

backed up by formal job analysis, advertising the job description widely to generate a pool of

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doi: 10.1111/1748-8583.12012

HUMAN RESOURCE MANAGEMENT JOURNAL, VOL 24 NO 3, 2014 307

© 2012 John Wiley & Sons Ltd.

Please cite this article in press as: Sayce, S., Weststar, J. and Verma,A. (2014) ‘The recruitment and selection of pension trustees: an integrative

approach’. Human Resource Management Journal 24: 3, 307–322.

qualified applicants and a selection process consisting of validated tests and interviews. To

HRM professionals, any process that circumvents these essential steps would result in

placement errors. We compare and contrast the two alternate approaches to identify the

strengths and weaknesses of each as it applies to placement of labour trustees. We argue that

unions would benefit from incorporating key elements of the HRM approach into their own

nomination approach. Rather than establish a new dichotomy from which to advocate a

particular set of trustee characteristics that are necessary for fund governance and performance

(the prudence versus professionalism debate), we attempt to synthesise these poles. We suggest

that a blended approach to recruitment and selection could result in labour trustees with more

skills in both the political and the professional realms. This would result in greater functional

competence, less role ambiguity and more effective participation on the pension board in

pursuing labour’s goals.

LABOUR TRUSTEES ON PENSION BOARDS

In Anglo-Saxon contexts, including Canada, Australia, the US and the UK, the composition of

pension fund boards has become more diverse in terms of affiliation, skills and experiences,

including cultural and socio-demographic aspects (Clark, 2007; Rafferty et al., 2008; Sayce, 2012;

Sayce and Ozbilgin, 2013). With the support of trade unions, diversity has increased through

greater numbers of plan members and retirees as pension trustees (Gribben and Olsen, 2002;

Hess, 2005; Sayce and Gold, 2011). Such diversity is often viewed as an important regulatory

mechanism within the corporate governance literature (Tyson, 2003). Diversity and

representation can enhance board effectiveness as it reduces agency costs through monitoring

the management’s inherent conflicts of interests with stakeholders (Daily et al., 2003). Carter

et al. (2003: 36) also report a positive relationship between board diversity and firm value

among Fortune 100 firms in the US.

In the Anglo-Saxon model, pension trusteeship is an executive decision-making role with

a high level of legal and moral responsibility (Kakabadse et al., 2003). Trustees oversee

significantly large financial assets.1Their negotiations with corporate sponsors over the funding

of occupational pension plans affect the pension outcomes of plan members. Moreover, as

institutional shareholders, pension funds exert a dominant role in global financial markets and

are influential in shaping global corporate investment policy.

Given the importance of the trustee role and the diversification of trustees through increased

member representation, a debate has arisen regarding the benefits and risks of so-called ‘lay’

trustees and the skills and education that are required for trustees to effectively fulfil their

fiduciary role. Clark et al. (2006) and Ambachtsheer et al. (2008) consider that well-intentioned

amateurs can complicate and limit the decision making of pension plans. Clark (2007) claims

that the tension between expertise and representation is increasing as institutions search

for appointees capable of performing well during periods of turbulent financial markets

and underfunded liability crises such as those experienced by Canada, the US and the UK over

the past decade. Although investment experts also face this uncertainty, Woods and Urwin

(2010: 8) claim that they are better able to test and modify their thinking than other naïve

investors.

Clark (2007: 9) argues that representatives need advanced quantitative skills, probabilistic

reasoning and numeracy skills to adequately monitor the actions of delegated agents;

otherwise, they can become too reliant on legal, financial and investment experts’ advice.

Evidence cited to support these claims is a pension trustee experiment that contrasted Oxford

The recruitment and selection of pension trustees

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© 2012 John Wiley & Sons Ltd.