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Pension funds: better governance through more self-reflection

24 April 2012

More self-reflection by pension fund boards reduces conflicts between the various interest groups within those boards. It also helps in resolving disputes. These are important conclusions in a survey of 313 pension fund boards by the University of Groningen.

The survey was facilitated by the pension consultancy firm Montae and DNB (the Dutch Central Bank). It is a follow-up to a previous study which the University conducted on the relationship between behaviour in the boardroom and the performance of boards.


Although pension fund officers are supposed to represent all interests even handedly, the representatives of employers and employees have interests which, of course, partly conflict. This may give rise to sub-groups within the board. The study showed that demographic differences between pension fund officers reinforce these sub groups and result in competitive types of conflict management within pension fund boards. As the composition of the sub-groups becomes more homogenous and the differences between the sub-groups are magnified, the sub groups’ profiles become stronger, thereby accentuating the conflicts. Imagine, for instance, a situation in which the employers are all men who are 55 or older and the employees are all women around the age of 30.

The flip side of diversity

The average age of the officers in the pension funds surveyed was 54. A board was made up, on average, of seven officers, only nine percent of whom were women. Boards with relatively more women were generally more diverse in their composition. The average age of the women was younger, too. ‘In that sense, diversity, which is normally considered by organizations to boost a team’s performance, can also have a flip side,’ according to Dennis Veltrop, a researcher at the University’s Faculty of Economics and Business. ‘This is the effect of a basic behavioural process called “social categorization”. Demographic differences lead to sub-groups.’

Dispute resolution

The study specifically focused on how boards resolve disputes. Two styles were distinguished: the ‘competitive style’, which is primarily aimed at ensuring that one’s own interests prevail, and the ‘cooperative style’, which seeks a solution that does justice to everyone’s interests. The more pronounced the sub-group feeling is within the board, the more likely the competitive style will be chosen. An important conclusion was that a large measure of self-reflection within a board demonstrably alleviates conflicts between the different sub-groups and thus fosters use of the cooperative style to resolve disputes.


Sanders Baars, a partner at Montae, believes this is a valuable observation for the day to day pension practice. ‘A lot of attention is currently being paid to the legislative proposal by the Dutch Minister of Social Affairs and Employment Henk Kamp to strengthen pension fund governance. Funds everywhere are preoccupied with the organization of their governance structure. This study adds a significant insight, in that it underscores how crucial it is for boards to keep in mind the connection between the choice of governance model and the board’s composition and performance.’

Note for the press

• Contact: Dennis Veltrop (RUG), tel.: (+31) (0)50-363 7238 or e-mail: / Sander Baars (Montae), tel.: (+31) (0)70-30 42 900 or e mail:
• The entire publication can be downloaded from

Last modified:10 January 2018 2.39 p.m.
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