Sherpherding Amongst Carnivores: The Governance Illusions When Fiduciary Duty Masks Systemic Capture

WRITTEN BY:

Paul Lomeri

This is a subject rarely deeply confronted in trustee trainings or acknowledged in the routine operations of pension schemes: that full compliance with fiduciary standards can coexist, comfortably, with outcomes that do not optimally serve contributors.

The architecture of governance appears intact, the boxes are ticked, and oversight by the Retirement Benefits Authority is formally satisfied. Yet beneath this surface, a more complex reality can take shape – one where influence, networks, and institutional inertia subtly redirect decision-making.

This is the governance illusion: a state in which systems function procedurally but are strategically compromised.

In Kenya’s pension landscape, trustees operate within clearly defined legal duties – prudence, loyalty, diversification, and compliance. However, these duties are often exercised within ecosystems shaped by overlapping interests. Board appointments may reflect not only competence but affiliation. Investment decisions, while justified through research and advisory reports, may align with familiar counterparties or prevailing institutional preferences. Over time, such patterns create an “acceptable corridor” of decisions – safe, defensible, but not necessarily optimal.

The challenge for trustees, therefore, is not merely to comply, but to see beyond compliance.

Navigating this terrain demands a shift from passive governance to active stewardship. Firstly, trustees must interrogate the quality of advice they receive. Consultants and fund managers, though technically independent, often operate within tight professional circles. Trustees who ask only whether advice meets regulatory standards risk missing whether it reflects genuine market breadth. Demanding comparative analysis, dissenting views, and scenario testing is not antagonistic – it is fiduciary rigor.

Secondly, independence must be practiced, not presumed. A trustee’s effectiveness lies in their willingness to challenge consensus, especially when decisions appear too aligned or too convenient. This requires intellectual and fiduciary courage as well as, critically, access to continuous education beyond standard certification programs. Trustees who understand emerging asset classes, governance risks, and behavioral finance are less susceptible to subtle forms of influence.

Thirdly, transparency must evolve from disclosure to intelligibility. Pension members are often presented with annual reports dense in figures but thin in explanation. True accountability lies in making decisions understandable: why a particular asset class was favored, how risks were weighed, and what trade-offs were accepted. When contributors can trace the logic of decisions, the space for masked capture narrows.

Yet the ultimate question is whether members can still benefit optimally within such a system. The answer is cautiously affirmative – but only under conditions of deliberate governance reform.

Schemes that institutionalize rotation of service providers, enforce staggered term limits for trustees, and adopt blind evaluation frameworks for investments reduce the risk of entrenched networks. Performance benchmarking against independent indices, rather than peer funds alone, introduces an external discipline that is harder to manipulate. Additionally, integrating technology – data analytics, audit trails, and even elements of algorithmic oversight – can expose patterns that human actors may overlook or ignore.

Importantly, member empowerment is an underutilized lever. When contributors are informed, engaged, and capable of questioning outcomes – through member fora, annual general meetings or digital platforms – the governance dynamic shifts. Trustees become not only stewards of funds but respondents to an active constituency.

The governance illusion persists because it is comfortable; it allows institutions to function without confrontation. But fiduciary duty, in its truest sense, is not about comfort, it is about vigilance. Trustees who recognize the subtle interplay between compliance and capture, and who act decisively within that awareness, can still deliver outcomes that honor the promise of pensions: security, dignity, and trust earned, not assumed.

And yet, even the most vigilant trustee must reckon with a harsher truth: governance can resemble shepherding in a field that is not entirely what it seems. The flock, contributions, graze within boundaries carefully drawn, but the terrain is dotted with actors who present themselves as benign custodians of value while quietly pursuing their own appetites. In such a landscape, the task is not merely to guide, but to constantly discern – to protect without illusion, to question without fatigue. For in fields where “self-proclaimed-vegan carnivores and cannibals” roam, stewardship is not a role of ease, but one of unrelenting awareness.