Board Profile - Public Sector Pension Investment Board

Public Sector Pension Investment Board

About PSP

The Public Sector Pension Investment Board ("PSP Investments") is a crown corporation established by Parliament by the Public Sector Pension Investment Board Act (the "Act") in September 1999.

The legislated mandate of PSP Investments, as established by Section 4 of the Act is to:

  1. manage amounts that are transferred to it under the Canadian forces Superannuation Act1, the Public Service Superannuation Act and the Royal Canadian Mounted Police Superannuation Act in the best interests of the contributors and beneficiaries under such acts;
  2. invest its assets with a view to achieving a maximum rate of return, without undue risk of loss, having regard to the funding, policies and requirements of the pension plans (the "Plans") and the ability of the Plans to meet their financial obligations.

PSP Investments currently manages a portfolio of approximately $39 billion in net assets (as at March 31st, 2008). Annual net contributions to the four Plans are approximately $4 billion and forecasted net contributions are expected to remain positive for the next 22 years. Assets are invested in fixed income instruments and Canadian and foreign equities, real estate, private equities, infrastructure and other permissible investments through in-house and external managers.

Appointment of Directors

A Board of Directors comprised of twelve members, including the Chairperson, oversees the management of PSP Investments. The Governor in Council appoints all members of the Board of Directors on the recommendation of the President of the Treasury Board. Qualified candidates for directorship are selected and recommended to the President of the Treasury Board by an eight-member Nominating Committee established by the President of Treasury Board. The Nominating Committee operates at arm’s length from the Board of Directors and the Treasury Board. PSP Investments’ legislation disqualifies as directors, members of the Senate, the House of Commons and provincial legislatures, federal government employees and those entitled to benefits from the Plans.

Roles and Responsibilities of the Board of Directors

The Board of Directors exercises its authority under the Act to prescribe the duties and responsibilities for all facets of the administration and operations of PSP Investments. These include all duties and responsibilities listed in the Act itself, as well as any additional duties and responsibilities that the Board of Directors sees fit to establish for the purpose of managing the organization, as per its mandate.

The Board of Directors’ role, as set out in its Terms of Reference, includes, among other responsibilities, the following:

  • Appointment and termination of the Chief Executive Officer;
  • Adoption of a written Statement of Investment Policies, Standards and Procedures (SIP&P), annual review of it, and approval of proposed amendments as is deemed necessary;
  • Approval of strategies and benchmarks for achieving investment performance objectives;
  • Adoption of appropriate policies for the proper conduct and management of PSP Investments, including a Code of Conduct for Officers and Employees and Conflict of Interest Procedures for Directors;
  • Ensuring that an effective operational and risk management system is in place, including appropriate risk management policies;
  • Approval of human resources and compensation policies;
  • Establishment of appropriate performance evaluation processes for the Board of Directors, the President and CEO and other members of senior management; and
  • Approval of quarterly and annual financial statements for each underlying Plan account and for PSP Investments as a whole.

Core Attributes, Competencies and Experience

Core attributes and competencies refer to skills and behaviors that must be demonstrated by all Directors of PSP Investments.

  • Informed Judgement: Ability to provide wise, thoughtful counsel from a broad perspective, to analyse, ask relevant questions at the strategic level, consider the perspectives of different stakeholders, understand situations and problems by addressing underlying issues;
  • Integrity and Accountability: High ethical standards and integrity; willingness to act on and remain accountable for Board decisions, to meet the accountabilities outlined in the law, by-laws and policies of the Board and to see oneself as serving the interests of the public;
  • Impact and Influence: Awareness of the impact of organizational issues, policies and decisions on public interest and concern. The capacity to be sensitive to the differing needs and agendas of multiple stakeholders and to act to persuade others in order to have a specific impact or effect;
  • Highly Motivated and Committed to Excellence: Driven to make a contribution to the excellence of the PSP Investments and having a keen interest in playing a strong leadership role; and
  • Financial Literacy: Ability to read and assess financial statements.

Skills, Knowledge and Experience

All Directors must have an excellent understanding of the role of a director and possess a general knowledge of pensions and a broad knowledge of investment management and its risks.

In addition, the Board of Directors requires a balanced set of skills, knowledge and experience to provide oversight and direction, including the following:

  • Previous experiences as a senior executive or as a board member;
  • Knowledge and experience in the following areas: public market investments; real estate investments; private equity investments; infrastructure investments, risk management; finance and accounting; institutional pension liabilities; governance; public affairs; information technology, communications and/or human resources;
  • Generally recognized accreditation as an investment professional (e.g. CFA, MBA, training in economics or finance).

It is the view of the Board, and the experience of the Nominating Committee, that a twelve-person board is needed to meet the legislative requirements for expertise and the need for diversity.

Regional and Demographic Representation

  • PSP Investments’ Nominating Committee takes into consideration gender balance in its candidate evaluation process and seeks to reflect diversity and representation from all regions of Canada. All Directors must be Canadian citizens and meet the other requirements as stipulated in the Act.

Working Conditions

  • Appointment Process of Directors: Each Director is appointed by the Governor in Council, on the recommendation of the President of the Treasury Board, from candidates proposed by the Nominating Committee to hold office during good behaviour for a term not exceeding four years. On the expiry of the term of an incumbent Director, the incumbent Director continues in office until he/she is reappointed or a successor is appointed.
  • Director Education: Investment management is the principal activity of PSP Investments. Therefore, all Directors are expected to continuously strengthen their understanding of investment management. Some of the Directors appointed to PSP Investments’ Board of Directors do not possess investment management-related backgrounds. These Directors will be asked to pursue a more rigorous program of investment management education. PSP Investments adopted a Director Education Policy which sets out the basic parameters of the director education program, and provides for financial and staff resources to promote and support the program. The Director Education Policy also recognizes the need for Directors to stay abreast of competencies other than investment management that contribute to the overall oversight of PSP Investments.
  • Number of Meetings: The Board meets for six regular meetings per year, five times at PSP Investments’ principal place of business in Montreal and once for an offsite meeting outside Montreal. Directors are expected to prepare for, and actively participate in, these meetings. Occasional participation in teleconferences is also required for special meetings (approximately 10 special meetings per year).
  • Committee work/additional duties: The Board of Directors has delegated certain responsibilities to five committees (Investment Committee, Audit and Conflicts Committee, Governance Committee, Human Resources and Compensation Committee and a Special Committee that is participating in the articulation of a financing policy). Directors are appointed to one or more of these committees that meet 4 to 6 times per year (or more often as deemed necessary), generally the day before the regular Board meetings.
  • Time commitment: The Board of Directors plays a very active role in guiding PSP Investments. Therefore, the minimum time commitment expected of Board members is approximately 35 days annually for meetings, travel and preparation for meetings. A multiple of this time commitment is expected from any Board member acting as Chairperson or Chair of a committee of the Board.
  • Requirement to comply with the Conflict of Interest Procedures for Directors: The Conflict of Interest Procedures for Directors are derived from the Act and from the Conflict of Interest Act and are intended to provide a workable process for identifying, minimizing and resolving potential conflicts of interest. The procedures help ensure that Directors have a full understanding and appreciation of PSP Investments’ principles and values to assist them in determining appropriate business practices and behaviour. The Conflict of Interest Procedures for Directors set out in detail the statutory and fiduciary duties of the Directors relating to conflicts of interest. The Conflict of Interest Procedures for Directors, among other things:
    1. Require Directors to give written notice to the Board of Directors of the nature and extent of the Directors’ interest in a transaction or proposed transaction;
    2. Prohibit Directors from voting on a resolution or participating in a discussion in any circumstances if the Directors have a conflict of interest, including, but not limited to transactions involving their interests;
    3. Require the disclosure of any other business activity which, directly or indirectly, affects the activities of, or is in competition with, PSP Investments.

1. PSP Investments also manages the amounts that are transferred to it by the Reserve Force Pension Fund, in accordance with the Canadian Forces Superannuation Act.