Sarbanes-Oxley (SOX) came into being because it became clear to Congress that there must be more checks and balances installed in the corporate finance world to prevent conflicts of interests from defiling the integrity of the balance sheet. If that was important, why is it that both large and small consulting firms who serve the retirement plan business do not work under the same (or a similar) framework of rules? What is at stake is the integrity of the pension system. Perhaps it is time for a change?

What is important to note is that in these cases the Plan Committee was either ready to approve of the arrangement, or in fact did approve of the arrangement. Indeed, in one case the Sponsor retained the Plans investment broker as an independent fiduciary. The broker was already being compensated by commissions/fees from the plans investment and services vendor. The Sponsor even signed a contract to that effect after a review by both internal and external counsel!

After IRPS called this conflict to the attention of the Sponsors (and their counsels), that independent fiduciary contract was unilaterally cancelled by the Sponsor. As incredulous as this episode may seem, if we give some benefit of the doubt to the Committee members involved and assume that their oversight was due to simple inattentiveness, we would still be highly critical of the lack of fiduciary governance process, fiduciary knowledge, and checks & balances, etc. that would allow for such a decision to occur in the first place.

The purpose of reviewing fiduciary governance processes is to detect structurally flawed decision-making frameworks that allow for such events to take place. None of these examples are small companies with few or limited resources. The people who work in these companies are bright, dedicated, hard working (probably overworked) individuals. However, they are clearly not in a position to recognize, evaluate or improve upon the decision-making processes that guide their own conduct. This is precisely why the independence of a fiduciary review is of paramount importance. It is exactly why the nature of the review ought to be rigorous enough to produce a document that provides a template for sound governance practices and is not tainted by existing relationships or revenues.

As the very old saying goes, "Don't hire the fox to count the chickens."

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