Stewards, as fiduciaries, are rightly concerned about the investment performance of their portfolios. Until recently however, few fiduciaries have considered the return on fiduciary governance as an equally important measure.
In our experience, strong governance can lead to a significant net increase in total return while reducing the investment risk and legal liability of the organization’s Board and staff. How do we assess the value of conformance? Let’s look at when organizations do not have good fiduciary practices in place.
1. Hillcrest Children’s Center, the oldest continually operated orphanage in the US – They lost 1/2 of the endowment built up over 196 years for not following a defined process in the selection of their vendors.
2. The Cooper Union for the Advancement of Science and Art, established in 1859 by the Cooper family to provide tuition free education – Cooper must charge tuition for the first time in its 156 year history for failure to implement a good risk management policy.
3. Sweet Briar College, founded as a college for women in 1901 – almost closed this past spring because of a failure of proper fiduciary oversight of their endowment.
Pension plans, endowments, foundations, associations and other trustee related entities are most vulnerable when they rely on “relationships” in the selection of vendors, investment planning and risk assessment without a well defined objective set of criteria when managing their assets. The same is true when considering issues of intergenerational wealth – how to achieve continuity of purpose without a “blueprint”? By blueprint I mean a framework built on the Global Fiduciary Standard of Excellence (GFSE) and integrated into/with their strategic operational planning.
The 21 best practices and 82 criteria outlined in the Global Fiduciary Standard of Excellence (developed by our colleagues at fi360 over a decade ago) are based on ISO management standards and are at the leading edge of fiduciary governance in the increasing complex global environment. While the GFSE started here in the States over a decade ago, it has expanded to include Canada. Because Australia and New Zealand law requires that members of the board of the Superannuation funds take training in the GFSE, we are beginning to see the adoption of the GFSE in other countries.
Diogenes-fg is one of the independent firms globally that provides assessments of conformance to the GFSE and can recommend to the Centre For Fiduciary Excellence in Toronto that an organization to be certified to the GFSE. We are not investment advisors, brokers, or purveyors of insurance products. More on us can be found on our website here.