Governance codes for Dutch pension boards to include cultural diversity

Pension funds should expand their governance codes to include a policy on cultural diversity, the Monitoringcommissie Code Pensioenfondsen announced in its latest annual report.

However, the commission, which was set up in 2018 by the Dutch pension federation (Pensioenfederatie) and Dutch social partners to encourage Dutch pension funds to increase board diversity, stops short from adding a formal third diversity criterion to its recommendations, in addition to age and gender.

“A modern governance code should not be a tick-the-box document,” the commission’s president Yvonne van Rooy commented.

“We want pension funds to pay attention to diversity because it will improve the governance of the fund, not because there is a code that prescribes it. Therefore I don’t support adding another box to tick,” she added.

According to the current voluntary Code Pensioenfondsen, funds need to have at least one female board member and one member below the age of 40. Despite the code having existed for four years now, the majority of pension funds are still not living up to it.

As per the commission’s annual report published earlier this month, 119 of 177 pension funds in the country do not meet at least one of the two criteria.

Pension funds struggle especially in finding young board members. There are 86 funds with at least one female trustee, but no-one below 40. The reverse situation only occurs five times.

In addition, there are 28 funds with neither a young trustee nor a female one. There are no funds without any men on the board, though several schemes have a majority female board. These include SPOA, the fund for pharmacists and Verloskundigen, the scheme for midwives. This fund has six female trustees and only one male.

Keeping the board young is especially challenging for pension funds, as formerly young trustees become old.

Van Rooy therefore recommends to relax the age criterion: going forward, the age of trustees on the date they are appointed will count rather than their actual age.

Pension fund trustees can be appointed for a maximum of two terms, or (usually) eight years. As a result, someone aged 47 can still count as “young”.

The Pensioenfederatie is currently working on an updated version of the governance code, which has not been revised since it was launched in 2018.

This article appeared originally in Pensioen Pro, IPE’s Dutch sister publication. It has been translated and adapted for IPE by Tjibbe Hoekstra.