King V, the latest South African corporate governance code/report, sends an important message to retirement fund trustees: good governance is not judged by what is written in a policy. It is judged by what the board does, and by the results that follow.
Retirement funds are not just savings pots. They invest large amounts of workers’ money into companies, bonds, property, infrastructure and other assets. These decisions affect not only returns, but also jobs, economic growth, business behaviour and long-term financial stability.
Trustees cannot simply approve documents, attend meetings and leave the rest to investment advisers. They have a duty to make sure investment decisions are properly governed, ethically made and focused on protecting members’ long-term interests.
King V reinforces something trustees should already understand. A fund can appoint asset managers, consultants and advisers, but the board remains accountable. In other words, some work can be delegated, but responsibility cannot.
It is not enough for a fund to say it cares about Environmental, Social and Governance (ESG) or stewardship. Trustees should ask whether these issues are influencing investment decisions. For example, when the fund invests for the long term, are environmental risks being considered? Are labour problems, governance failures or corruption being treated as financial risks? Are conflicts of interest properly managed? If something goes wrong, does the board learn from it and improve?
King V pushes trustees to focus on outcomes, not just process. A board may have well-written policies, but if trustees do not ask questions, challenge service providers and follow up on concerns, those policies mean very little.
A company with poor leadership, corruption problems or weak treatment of workers can lose value quickly. A project that ignores environmental risks can become expensive or fail.
This is also what the FSCA increasingly expects. The regulator is looking beyond paperwork. It wants evidence that trustees are engaged, capable and applying their minds. That means trustees should be able to show that they understand the main risks facing the fund, receive useful reports, and use that information to make better decisions.
For organised labour trustees, this role is especially important. They bring the worker perspective into the boardroom. They can help ensure the fund not only chase returns on paper but also pays attention to the real-life issues that affect members’ lives and retirement outcomes.
Good governance: What the FSCA may look for
The FSCA may expect trustees to show:
- that the fund’s investment policy, manager mandates and actual practices are aligned
- that the board and/or a board committee is collectively responsible for investment oversight
- that trustees receive proper stewardship training and understand the issues affecting the retirement fund
- that conflicts of interest are identified, disclosed and managed
- that reporting focuses on outcomes and action, not just box-ticking
