May

2013

What is governance and what does it mean for retirement funds?

Search Google for what governance is about and you will find many definitions. Including the process of decision-making and the process by which decisions are implemented (or not implemented). Governance can simply be described as the action or manner of governing (governing is to conduct the policy, actions, and affairs of a state, organization, or people but also to control, influence, or regulate (a person, action, or course of events)) . However a broader definition still is governance is concerned with overseeing the responsible, legal, ethical, transparent and effective achievement of organisational goals. Governance deals with the formation and stewardship of the formal and informal rules, laws, regulations and policies that regulate delivery of services to the retirement fund. Boards appointed or elected according to specified conditions usually exercise governance. Effective governance structures are normally those that are independent of executive structures1 - while including members of the executive (employer appointed trustees) - in order to represent the interests of the organisation's investors or stakeholders. Governance is usually exercised by distinguished 'elders', but also by stakeholder representatives.

In the retirement fund context it should be remembered that a retirement fund is a separate legal entity to that of its sponsor.