'The need for Trust amongst Pension Boards and their Sponsors is vital to ensure good outcomes for Fund members- Stephen Fallowell MNT committee member explores the concept of Goodwill
amongst scheme stakeholders'
Good Will Hunting is a 1997 American drama film, the film follows 20-year-old South Boston labourer (Matt Damon) an unrecognized mathematical genius who only through the intervention of a therapist (Robin Williams) realises his full potential and reconciles his personal life. Throughout the therapy sessions Williams attempts to, and finally succeeds in getting Damon’s cooperation by harnessing goodwill between them.
The dictionary definition of Goodwill is ‘friendly, helpful, or cooperative feelings or attitude’ thus for Williams to help Damon there needed to the goodwill between them. In establishing goodwill between the two parties, not only is Damon’s potential realised, but Williams is also able to come to terms with his own past. Goodwill provides mutual benefits to both parties in the relationship.
Goodwill is recognised in business terms as an intangible asset solely identified with that business. It cannot be separated, or divided, sold, transferred or exchanged: It is integral within that business. However, it can be damaged and destroyed.
Retail outlets particularly depend on the goodwill built up with their customers. In 1991Gerald Ratner, head of the Ratner Group delivered a speech to Institute of Directors. This group of jewellery outlets whose shops and wares though widely regarded as "tacky," were, nevertheless, extremely popular with the public, until Ratner said in that speech;
“We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, "How can you sell this for such a low price?" I say, because it's total crap’.
This act of bravado nearly saw the collapse of the group with £500 million wiped of its share price. Overnight he had lost the goodwill of his customers.
Goodwill is vital in the relationship between Boards of Trustees and the sponsoring business and between the Trustees and members of the fund.
There needs to be a recognition by the Trustees and the sponsor that establishing an open relationship is beneficial for both parties, particularly in time of Pension deficits and when a sponsor is under financial pressure.
The Pension Regulator in February 2009 issued guidelines that stated
‘When the sponsor company is under pressure there is potential to renegotiate previously agreed plans to repair pension deficits (recovery plans). There is no reason why a pension scheme deficit should push an otherwise viable employer into insolvency. But the pension recovery plan should not suffer, for example, in order to enable companies to continue paying dividends to shareholders.’ and
‘Where an employer is facing more severe difficulties, it is in the interest of pension scheme trustees and the employer for information to be shared openly’
Openness can only come through establishing goodwill that enables both sides to provide reasonable solutions to difficult issues. Should one side have a hidden agenda then the results can only too readily be seen in the BHS and Carillion Pension Fund scandals.
Goodwill is established by the Trustees with the Fund’s members by the tangible means of paying the correct Pensions on time and meeting their requirements through efficient administration and by the intangible element of trust that is placed in the Trustees that they will always act in the best interest of the members.
Indirect contact with members is normally through websites or communications like the Annual Funding statement. I have tried to reach out to members directly through seminars and Group presentations, but there is a case, I believe, for consideration of an annual getting together similar to a Company AGM.
Whatever approach is adopted the benefits of obtaining goodwill on all sides is immense, so good hunting.