Achieving Investment Excellence

CHAPTER 10Becoming an Effective Board

Key Take Aways

This chapter focuses on the board. We start by addressing the tasks of the board and then move on to board composition. We expand on a key concept, the so called “governance budget,” the combination of time, expertise and organizational effectiveness of the decision makers. To a large extent this “budget” determines whether or not your fund will be able to be excel. Following this, we pinpoint the ingredients of an effectively functioning board, which can help identify the strengths and weaknesses of a board. Here we delve into an already-mentioned key concept of this book, which should help in striking the right balance as a board member: “the right altitude—the right distance—the right horizon.” We conclude the chapter by presenting ways to improve the board over time.

RESPONSIBILITIES OF THE BOARD

There are several definitions of a board, but a useful one could be that the board of a pension fund is the instrument to deliver value for its participants¹ by providing the best possible financial outcome for the agreed-upon pension deal. The board's responsibilities are described as fiduciary duties. These responsibilities include policy formulation and foresight, strategic thinking, shaping the governance, supervision of management, and accountability.

Board task 1: Policy formulation and foresight has a long-term, external ...