Should Pension Systems Pay Their Trustees?

Trustees of pension systems are tasked with significant power – yet, aside from stipends and travel reimbursements, most trustees do their job for free.

Should that be the case? Or would better pay lead to better trustees and stronger governance?

The IB Times discusses the issue:

Fiduciary management is a complex matter that often takes an extraordinary amount of time, effort and know-how. But some of the most powerful fiduciaries in the country — pension fund trustees overseeing more than $3 trillion in capital — work entirely unpaid. While many states bar gifts to elected officials who oversee pension policy, the appointed trustees of many pension systems are allowed to attend subsidized conferences where they are wined and dined by asset managers seeking to gain business.

Pension and ethics experts say that’s a problem.

Craig Holman, the ethics in government lobbyist for Public Citizen, has found that there is a strong correlation in state legislatures between low pay and poor ethical standards. “While all legislatures have their problems, it is an indisputable fact that Texas — which pays their legislators next to nothing — and California — which pays their legislators a high-level civil service salary — have vastly different standards when it comes to government ethics, with California the winner,” said Holman. “Passing strong ethics laws is far easier in states where legislators make enough to maintain a good standard of living.”

[…]

Jay Youngdahl, a fellow at Harvard’s Initiative for Responsible Investment and a leading legal expert on fiduciary issues, pointed out the wide distinction between unpaid trustees and asset managers who make hundreds of millions annually. “Trustees are expected to do an enormous amount of fiduciary work and take on difficult responsibilities for little or no pay, yet the service providers and investment managers for their funds earn some of the highest salaries paid in this country. The comparison is startling and makes no sense. The system is in need of reform.”

Pension360 has previously covered the pay of trustees sitting on the CalPERS Board of Administration.

Photo by c_ambler via Flickr CC License