The cult of the leader: how long is too long for a trustee chair's tenure?

The chair of the trustee board is a vital position in any governance structure. Having someone with experience of the scheme can be a vital safeguard against gaps in a scheme's living memory.

But if there is no end point for the tenure of the trustee chair, that person risks becoming more of an eternal leader than a chosen representative, making it more difficult to check their performance. 

Mark Hodgkinson, director at governance consultancy Muse Advisory, said the first priority of schemes should be to make their trustee chairs subject to a fixed term.

"It is well-established practice among large schemes and especially where independent trustees are appointed," he said. "But the same cannot be said for many smaller schemes. Fixed terms provide a minimum checkpoint for performance management."

There is no set industry norm for the length of that fixed term, which is more likely to be a part of the original discussion. "The term should be long enough for the chair to build relationships and have the opportunity to exert a positive impact on scheme governance," said Hodgkinson.

"We see some appointments of three years, but think that four to five years, with annual reviews, would be a more sensible minimum. And seven years seems to us a sensible maximum – it would cover two valuation cycles." 

There are some who are more firmly in the stability and experience camp, given the mounting, unprecedented governance challenges that have built up across both defined contribution and defined benefit pension schemes.

Simon Riviere, scheme manager at professional trustee company PSIT, said: "This increasing complexity suggests that stability and expertise at the helm should be welcomed, particularly where the chair role is undertaken by a professional trustee."

"Although fresh eyes may bring new insights or skills to the board, a new chair is unlikely to have experience of the scheme or their style may not fit with the particular trustee board." 

Riviere gives the following advantages of a stable, experienced chair: knowledge of the scheme, its membership and its issues; knowledge of the employer's operations, finances and governance; and a more "settled" trustee board that works better as a team. In other words, longevity is good.

"This could be balanced by requiring the chair to act for a certain term, to stand for re-election, or to be subject to performance reviews," added Riviere. "However, a trustee chair should not be removed simply because they have been in the role for some time."

Marian Elliott, director at consultancy Spence & Partners, said rotating the position around a trustee board, while keeping the former chair as a trustee, could provide a middle way, but added the answer has to be appropriate for the scheme in question.

"In some circumstances if you have a long-serving trustee board it may then be appropriate to change the chair from time to time," she said, but added that for an inexperienced board, with high turnover, this may be less possible.

Some pension boards have lacked the rigour of company boards when it comes to recording decisions and issues, making any living memory among the trustees incredibly useful. "[Having] that long memory on the trustee board can be very helpful," said Elliott.