Finweek English Edition - - Employee benefits - COPY: Garth The­unis­sen AD­VER­TIS­ING: Bev­er­ley Mayston

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.

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