Emotional Intelligence and Pension Fiduciaries
In early 2006, I published an article entitled "Do Fiduciaries Need Better Incentives to Make the Retirement System Work?" with pension professional, Mr. Wayne Miller (Executive Decision, January - February 2006). The major premise is that the work of the investment fiduciary (for both defined benefit and defined contribution plans) is challenging at best. Do something right and few people pay attention. Violate a rule or make a decision that results in an economic loss and there is "you know what" to pay. Fiduciaries seldom earn anything extra for their work at the same time that they assume sometimes signficant personal and professional liability exposure.
You may ask - Why does anyone choose to be an investment fiduciary when the payoff is so lopsided? For some individuals, their voluntary service is a badge of honor. By assisting plan participants, these folks believe they can make a true difference. For others, retirement plan work is part of the job. Their boss says "you take care of this" and they have no choice, unless they quit that position or the company or both. A third category - pension finance managers or independent fiduciaries, external to a plan - represents a full-time job commitment to handling retirement benefit plans and nothing else. (Interestingly, results of a survey soon to be released by Pension Governance, LLC and the Society of Actuaries suggest that someone either spends very little of their work week or almost all of their work week in handling retirement plan financial decision-making. The survey, entitled "Pension Risk Management: Derivatives, Fiduciary Duty and Process" is tentatively scheduled for release during the week of July 21, 2008.)
In his just published statement to the House Committee on Ways and Means, Miller addresses what he calls a "dysfunctional retirement plan system" in the context of Emotional Intelligence ("EI"). He bemoans the "governance nightmare" that ensues when "responsibility exists without individual accountability." In his view, emotional influences include, but are not limited to:
- "the avoidance of blame,
- promoting the illusion of competency,
- the need for approval,
- the lack of self acceptance of making mistakes,
- the desire to look good,
- the willingness to acquiesce to the status quo rather than live out one's own values and last but not least...
- the lack of personal courage to speak out."
Wow. This man packs a one-two punch and certainly says what he thinks. Whether you agree or not, his statement is worth a read. Click to access "Statement of Wayne H. Miller, Denali Fiduciary Management, Vashon, Washington."
This blogger gal likes to think she is more upbeat with respect to good intentions on the part of investment fiduciaries (though legal counsel will likely urge that intentions are not enough to evidence the discharge of fiduciary duties). Unlike Miller who asserts that "the problem isn't technical," I am a strong proponent of a systematic, disciplined approach, with lots of common sense and "roll up the shirt sleeves" due diligence thrown into the mix.
What do you think? Send us an email and let us know.
Editor's Notes:
- Wikipedia refers to EI as a focus on "ability, capacity, or skill to perceive, assess and manage the emotions of one's self, of others, and of groups."
- Daniel Goleman offers insights in his popular book entitled Emotional Intelligence: Why it can matter more than IQ, Bantam, 1997.
- Look at "Pension Problem Solving - Building the Team" (December 27, 2006 post)
- Check out "Do We Need a Dr. Phil for Pensions?" (December 19, 2006 post)
- Read "Do We Need an Easy Button for Fiduciaries?" (May 21, 2006 post)
- Review "Who Wants to be a Fiduciary Anyhow?" (May 16, 2006 post)
