KEEP IT SIMPLE
THANKS TO scandals like Enron and more recently Fidentia, good corporate governance procedures are increasingly being formalised to ensure that companies and their employees do not become the victims of fraudulent practices.
However, in the retirementfund landscape, arguably the most important aspect of the broader good corporate governance mantra is the issue of investor governance.
James Louw, head of implemented consulting at Acsis, describes investor governance as the process of optimising investment decisions within a framework compliant with statutory and commonlaw fiduciary duties.
Louw says one of the problems surrounding investor governance is that under the reigning status quo most investment decisions are informal at best. “That’s why a document like PF130 needs to be celebrated because it gives trustees a formal guide on what they should be doing – something they haven’t had before.”
Louw also argues that improved investor governance does not mean that trustees have to be professional investment experts.
Rather, Louw says they should be trained in how to monitor the investment decisions of their service providers to ensure that the asset managers do not stray from the straight and narrow.
“You can’t train guys with full-time jobs how to become expert investment officers but, you can train them how to monitor the behaviour of the investment experts to ensure that they’re not left to run riot.”
Louw makes his point by adding that virtually all of the governance debacles in recent times have centred on ordinary governance issues such as lack of supervision and conflicts of interest rather than because trustees did not understand the complexities of the stock market.
“It’s not about doing extraordinary things. It’s about doing the basics extraordinarily well,” he says.