Why good corporate governance is crucial for the pension industry

GOOD corporate governance is a key factor underpinning the integrity and efficiency of any organisation.

For those entrusted with the management and administration of wealth on behalf of others, such as pension funds, good corporate governance is crucial.

Corporate governance encompasses every aspect of management and calls for deliberate observation. In the absence of sound corporate governance principles, corporate strategies run the risk of failure.

The pension industry operates on and is sustained by mutual trust between pension scheme members and fund managers.

Participating members contribute to pension schemes trusting that their managers and administrators will act in their best interest.

The business landscape has undergone changes mostly influenced by disruptive force such as technology. Social and political changes have also had notable influence on the industry.

Coupled with these changes, a slew of corporate scandals over the years have put a dent in public trust in corporations and increased public scepticism and mistrust in some businesses and the political elite.

In Zambia, the corporate world, however, has renewed hope in the pronouncements of the new government which has made public declarations of its intentions to restore the rule of law in the management of national affairs.

This is an opportunity for corporates to recommit to the tenets of good corporate governance so as to encourage transparency and rebuild the trust that is critically needed.

Private pension schemes should operate within and in accordance with existing legislation and effective corporate governance.

They should prioritise ensuring that their administration and operations reflect the interest of shareholders and members and that the funds' activities and risks are responsibly monitored and managed.

This ethos should be the invisible force propelling the fund, its administrators and fund managers, so that they can be the largest players in the pension market.

Building the fund on principles of sound corporate governance has helped maintain trust in pension funds among shareholders and members.

The pension schemes should be in sync with the complexities and realities of the business environment, and the challenges shaping the industry today and in the future.

As an industry that plays a crucial role in the economy relating to key channels of transmission, especially financial and labour markets, it is important that government, business and society work together to come up with a shared vision for delivering prosperity.

To be successful, it must be underpinned by trust and understanding of the roles played by all parties involved.

Good governance is, and always will be, work in progress, but it has come a long way in recent years.

From policy and regulatory perspectives, corporate governance guidelines should be a shinning light in the promotion of sound governance practices and safeguarding the discharge of fiduciary duties.

Overall, stakeholders in the industry hope that these guidelines will raise the minimum standard by which business is conducted.

By raising the bar, trust of members will no doubt increase.

Any previous loopholes and oversights that may have inhibited growth and transparency will become a thing of the past.

As the old adage goes “what gets measured gets done”, this holds true in the context of good corporate governance.

Pension schemes should take the lead; hold themselves to account and not just be forced to change through legislation.

Holding themselves up to greater scrutiny and seeing how they compare is a good way to motivate change.

That is good for the pension industry, and by extension, the availability of capital for investment in the nation's growth and development, and the long-term financial security of all the people.