Responsible Investor

mechanisms that encourage good decision-making, proper and timely execution, transparency and regular review and assessment.
Fund trustees are typically responsible for monitoring the pension scheme’s employees and external agents in their execution of the fund’s strategy. Identification and selection of trustees is, therefore, a vital part of fund governance, although many public fund boards in Asia (and elsewhere) include political appointees whose qualifications may be limited. Good governance demands a clear succession planning structure to deal with the appointment and removal of trustees.It also requires that trustees meet regularly, with adequate time for consideration of the complex matters facing the fund. Transparency is a crucial aspect of fund legitimacy. Trustees should regularly disclose information both to beneficiaries and supervisory authorities, covering their decision-making procedures, fund policies and investment returns. In Asia, the public pension funds tend not to disclose as much data as some funds in developed markets, but many now publish a website.
State pension schemes have historically been allowed relatively little independence from government sponsors and regulators, but in order to retain public confidence in the quality of their decision-making, the trustees must be viewed as autonomous and independent from political pressure. In emerging markets, a complex relationship may exist between public sector pension schemes and government agencies, which have established the funds and tend to have an ongoing role in their operations. Pension schemes are often directly linked with government ministries: Malaysia’s Employee Provident

Fund answers to the Ministry of Finance, for example, and Thailand’s Social Security Organisation is controlled by the Ministry of Labour and Welfare.
In some emerging markets, moreover, in addition to generating a long-term return on investments, the pension fund is expected to have a responsibility to support national development objectives. This may be positive – GPF Thailand explicitly describes its role in the development of the Thai economy, with one of its primary objectives being to promote good investment practices.
However, investments in government securities, domestic companies or projects which are interpreted as being motivated less by investment return potential than by political or developmental goals (financing government budgetary requirements or propping up a failing industry, perhaps) can damage the pension fund’s credibility and legitimacy.
Investment in privatisations can cause possible conflict of interest between the government’s policy of asset redistribution and its role as the underlying sponsor of the pension fund. At the same time, if the pension fund’s stake in the privatised company is substantial, the goal of the exercise may be effectively undermined – control of the asset merely passes from one arm of government to another.
Some state pension funds, such as NPC Korea in 2006, have also been criticised for appearing to use their voting rights to support local company management against foreign take-over bids and shareholder activism, rather than pushing for maximum value to shareholders.
Domestic capital market development is a government

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