Social responsibility and fiduciary duties of trustees

Many assumptions underlying the way economists, policymakers and regulators have traditionally viewed pension schemes no longer apply K. Johnson and F. Graaf Fiduciary duties of pension fund trustees have been described as a ‘ramshackle concept’, a Gothic legal edifice of great antiquity which no longer has much to offer as a model to delineate the duties of pension fund trustees. Therefore, to financial or investment experts living in the twenty-first-century, post-Sarbanes-Oxley world, discussion of fiduciary duties in the context of modern pension fund management may appear to jar. However, why should the fiduciary duties of pension fund trustees be thought of as a historical relic when they appear to sit happily as part of the duties owed by a company director to his or her members? Indeed, so much so are fiduciary duties of company directors regarded as relevant and necessary to good corporate governance that they were codified by recent UK company legislation. Part of the explanation surely lies in the fact that pension funds have developed rapidly in the latter part of the twentieth century. From humble beginnings as simple trust-based legal entities, pension funds have become very sophisticated and complex investment vehicles. In fact, pension funds are now major players in the global investment market and in some cases a dominant force in local or regional investment markets.