Professional Documents
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Issa Guidelines Good Governance
Issa Guidelines Good Governance
Issa Guidelines Good Governance
issa guidelines
ISSA
Publications of the International Social Security Association enjoy copyright. For rights of reproduction or
translation, application should be made to the International Social Security Association, ISSA Publications, Case
postale 1, CH-1211 Geneva 22, Switzerland.
The designations employed herein, which are in conformity with United Nations practice, do not imply the
expression of any opinion on the part of the ISSA concerning the legal status of any country, area or territory or
of its authorities, or concerning the delimitation of its frontiers.
Also published in French:
Lignes directrices de lAISS en matire de bonne gouvernance lusage des institutions de scurit sociale
Also published in Spanish:
Directrices de la AISS para la buena gobernanza de las instituciones de seguridad social
Also published in German:
IVSS-Good-Governance-Richtlinien fr Institutionen der sozialen Sicherheit
ISBN 978-92-843-1195-8
International Social Security Association 2011
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Structure of the ISSA Good Governance Guidelines for Social Security Institutions
Acknowledgements
PART A: GOOD GOVERNANCE GUIDELINES FOR the BOARD AND the MANAGEMENT
T A B LE O F CON T EN T S
Foreword
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Transparency
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Predictability
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Participation 23
Guideline 1: Board representation of stakeholders
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Dynamism 25
Guideline 1: Implementing rules and regulations for legislation, policy or decree
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Transparency
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Predictability 36
Guideline 1: Duties and responsibilities of members and beneficiaries
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Participation 38
Guideline 1: Participation of stakeholders
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Dynamism 39
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Introduction 42
Actuarial soundness
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T A B LE O F CON T EN T S
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Foreword
Good governance is central to the effective delivery of social security and is a priority of the
International Social Security Association (ISSA), which has the constitutional mandate to promote
and develop social security worldwide through technical and administrative improvement.
The ISSA Good Governance Guidelines for Social Security Institutions seek to provide member
organizations with a practical and comprehensive reference on good governance. The publication
presents a governance framework that spans a range of internal governance issues that are involved
in the administration of social security programmes. The Guidelines recognize accountability,
transparency, predictability and participation as principles of good governance, and introduce
dynamism as an additional important characteristic.
In line with the ISSAs commitment to support and enhance the capacity-building efforts of its member
organizations, the enclosed CD-ROM includes an interactive Toolkit that facilitates the application
of the Guidelines in an institutional context. During the programmatic triennium 2011-2013, the
ISSA will develop and provide members with special support mechanisms in order to promote the
implementation of the Guidelines.
In November 2010 the ISSA Good Governance Guidelines for Social Security Institutions were
presented for the first time at the World Social Security Forum, in Cape Town. The enthusiastic
reception of the Guidelines by the participants has encouraged the ISSA to expand the project and
to develop additional guidelines which will encompass other areas of social security administration
in the future.
The ISSA looks forward to comments and feedback from users, to inform revised versions of the
Good Governance Guidelines, and to further improve its service to its member organizations. We
hope that these guidelines will serve to develop and promote good governance practices in our
membership, and will encourage member institutions in their efforts to achieve excellence in social
security administration.
Hans-Horst Konkolewsky
ISSA Secretary General
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The diversity in governance practices around the world is a reflection of differences in the political,
social, economic and cultural histories of countries. There is common recognition, however, that good
governance is aimed at delivering what is mandated and ensuring that what is delivered is responsive
to the evolving needs of the individual and society. Improved education and new technologies have
increased the expectations of the public for accountable and transparent administration, including
constant improvements in the delivery and performance of social services.
Good governance is an important objective for social security organizations and is a key principle
of the International Social Security Association (ISSA). To provide ISSA member organizations with
a basic framework on good governance, a project on governance and social security was included
in the Associations 20082010 Programme and Budget. The ISSA Good Governance Guidelines for
Social Security Institutions is an outcome of this project.
This publication provides a convenient listing of the good governance guidelines and the suggested
governance structures and mechanisms that are contained in the Toolkit. The enclosed CD provides a
copy of the complete and interactive version of the Good Governance Guidelines for Social Security
Institutions: A Self-Assessment Toolkit which can also be accessed through the ISSA Extranet.
The concept of governance is understood in many ways by different people. Its definition often
depends on the goals to be pursued, the entities involved, and the socio-political environment within
which these goals are to be achieved.1
Many definitions of governance focus on processes, structures and arrangements that pertain to
the administration of an entity or unit of organization. The ISSA aligns its definition of governance
with those that underscore the exercise of authority and power. The Asian Development Bank (ADB)
describes governance as the manner in which power is exercised in the management of a countrys
economic and social resources for development. Similarly, the World Bank refers to governance as
consisting of the traditions and institutions by which authority in a country is exercised.
In the context of social security administration, the ISSA defines governance as the manner in which
the vested authority uses its powers to achieve the institutions objectives, including its powers
to design, implement and innovate the organizations policies, rules, systems and processes, and
to engage and involve its stakeholders. Good governance implies that the exercise of the vested
authority is accountable, transparent, predictable, participative and dynamic.
Various authors define and associate a number of principles with good governance, four of which
are of particular relevance to social security institutions, namely, accountability, transparency,
predictability and participation. The ISSA proposes to include dynamism as a fifth principle to
characterize good governance. Each of these principles reinforces the four others. Observing one
principle facilitates the practice of the other principles, thereby creating a virtuous environment for
good governance. In the context of social security administration, a summary of how these principles
are defined in the existing literature is given below.
Accountability is the ability to hold legally responsible the officials who are in charge of the institution.
It requires establishing norms and standards to evaluate the achievement of the institutions
mission, and a well-functioning system of redress that protects the interests of stakeholders and
deters mismanagement and deviations from the institutions mandate. As trustees, social security
administrators are responsible, and hence are accountable, for managing the programme prudently,
efficiently and equitably.
Transparency is the availability and accessibility of accurate, essential and timely information to
ensure that stakeholders are well-informed of the true state of the social security programme and
how it is being managed. Transparency in the decision-making process promotes honesty, integrity
and competence, and discourages wrongdoing. Clarity and simplicity of rules, systems and processes
help to limit the areas that would require discretion and arbitrariness in programme administration.
Predictability refers to the consistent application of the law and its supporting policies, rules and
regulations. For social security programmes, the rights and duties of members and beneficiaries
must be well-defined, protected and consistently enforced. Surprises and sudden changes in
contribution rates, benefit entitlements or other features may seriously undermine the credibility of
the programme.
T h e I S S A a n d G o o d G o v e r n a n c e - Th e I S S A d e f i n i t i o n o f g o o d g o v e r n a n c e
1. A partial list of relevant literature is given at the end of this document. The full literature review is available on the
ISSA Extranet.
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Participation refers to the active education, engagement and effective involvement of stakeholders
to ensure the protection of their interests. The meaningful participation of stakeholders depends on
their access to information about the institution and their capacity to understand and act on such
information.
The principle of dynamism is simply defined as the element of positive change in governance. While
the other four principles of governance may well be applied in the context of maintaining a status
quo, dynamism refers to changing and improving on the status quo itself, by doing things more
efficiently and equitably, and by responding to the evolving needs of programme members and
beneficiaries, thereby creating new value.
Financial sustainability
The Board and Management are duty-bound to maintain an adequate level of funding to deliver
the promised benefits to members and beneficiaries, and to ensure the cost-effectiveness of the
administration of the social security programme. Maintaining the financial sustainability of the
programme and balancing the inflow of contributions and investment income with the outflow of
benefit payments are some of the key management challenges in this area.
Sound investments
For programmes with an investment mandate, the Board and Management must ensure that reserve
funds are invested in accordance with basic prudential rules such as profitability, safety, liquidity and
diversification. Framing the investment policy and strategy, portfolio and asset-liability management,
enforcing the prudent person principle, valuation of assets, representation in boards of companies
where the institution has significant asset holdings, and policies on investments with socio-economic
utility are some of the issues in this governance area.
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The raison dtre of social security institutions is to administer the rights and obligations of members
and beneficiaries. Coverage extension, collection of contributions, adequacy of benefits, distribution
of benefits, quality standards of service for members, and prevention of fraud and corruption in the
programme are some of the central issues in this area.
The ISSA and Good Governance - Structure of the Good Governance Guidelines
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Acknowledgements
The ISSA Good Governance Guidelines for Social Security Institutions was produced as a result of
the close collaboration of the ISSA Secretariat with the ISSA Technical Commission on Organization,
Management and Innovation (TCOMI), and the ISSA Technical Commission on the Investment of
Social Security Funds (TCInvest). Inputs were also received from the technical sessions on governance
at the Regional Social Security Forums held in 20082010 as well as the ISSA Technical Seminar on
Governance Principles for Board, Management and Investments of Social Security Institutions held
in 2010.
Users are encouraged to forward their comments and suggestions to the ISSA Secretariat including,
in particular, good practice examples that may be added to the ISSA Good Practices in Social Security
Database.
The principle of accountability is at the heart of good governance. At a political level, it means making
rulers accountable to the ruled. To enforce accountability, governance structures and mechanisms are
needed to enable the principals to hold their chosen trustees legally responsible for their acts and
decisions.
The Board of a social security institution should be accountable to the members, beneficiaries and
other stakeholders of the social security programme. The members of the Board should be liable
for their actions as well as for their failures to act. The legal liability of the Board members must
be defined by the legislation, policy or decree that establishes the social security programme. As
trustees, Board members are responsible, and hence are accountable, for achieving the institutions
mandate and for managing the programme prudently, efficiently and equitably.
Internal and external governance structures and mechanisms must be in place to ensure the
efficiency of the organization in the way the institutional objectives are set and decisions are taken,
implemented and reviewed.
pa r t A - b o a r d - A c c o u n t a b i l i t y
Accountability
The Board should not be able to absolve itself completely of its responsibilities by delegating certain
functions to the Management of the social security institution or to external service providers.
The suggested guidelines through which the Board may promote the principle of accountability in the
administration of a social security institution are discussed in the following pages.
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Governance structure
There should be a supervisory authority or external regulatory body to ensure the appropriate
Governance mechanism
The supervisory authority or external regulatory body should conduct regular and periodic
Governance structure
There should be a supervisory authority or external regulatory body to exercise oversight in
Governance mechanism
The supervisory authority or external regulatory body should conduct regular and periodic
reviews to ensure the responsibility of the Board for its delegated functions.
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Legislation, policy or decree may provide for the Boards independence from political
interference to implement its mandate by prescribing the selection process and by defining
the grounds for removal from office solely for just cause.
Governance structure
There should be an independent and competent external authority to adjudicate complaints
Governance mechanism
The legal framework or the by-laws of the social security programme should establish the
pa r t A - b o a r d - A c c o u n t a b i l i t y
Governance structure
An independent and competent external authority should ensure the compliance of the selection
process with the established suitability and competence standards for members of the Board.
Governance mechanism
There should be clear, unambiguous and documented suitability and competence standards for
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Governance structure
There should be an independent and competent external authority that is responsible to take
Governance mechanism
The external authority should have investigative powers.
The external authority may establish a protection and legal defence programme for
whistleblowers.
Stakeholders should be aware of the process to file legal complaints against the members of the
Board.
Governance structure
There should be an internal auditor who reports directly to the Board.
There should be an external auditor who reports directly to the Board.
There should be an independent, external custodian to hold and ensure the safety of the assets
Governance mechanism
Both the internal and external auditors may be mandated to report to the external authority that
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The Board should implement the established actuarial measures to ensure the financial
sustainability of each of the social security programmes established by the institution.
Governance structure
Legislation, policy or decree should identify the competent authority to determine the design,
the actuarial measures and the financial sustainability principles of the social security scheme,
to decide on any changes in its features, and to ensure compliance with these measures or
principles.
There should be no conflict of interest between the authority that sets the measures and the
authority that implements these measures.
There should be an internal actuary and/or external actuary reporting directly to the Board,
to perform regular and periodic actuarial reviews of the different social security programmes
established by the institution.
pa r t A - b o a r d - A c c o u n t a b i l i t y
Governance mechanism
The design and actuarial measures of each of the social security schemes must be documented
and well-defined.
The internal actuary and/or the external actuary may be mandated to report to the external
authority with jurisdiction over the social security institution.
The governance framework defined by the ISSA good governance guidelines may serve as a
reference to provide a comprehensive and systematic evaluation of the potential impact of risks
faced by the institution.
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Governance structure
The Board should require Management to identify and study the risks faced by the institution, to
propose policies and implement Board-approved measures to manage or avert the risks.
The Board, as a whole or through a committee or sub-group of its peers, should exercise oversight
on the conduct of these studies by Management.
The Board should ensure that Management has the capacity to anticipate and evaluate any and
all risks that the institution may face.
Governance mechanism
Management should periodically provide the Board with risk studies and reports, and recommend
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The Board should ensure that the institution is performing its mandate efficiently. It should
establish a set of standards and benchmarks to evaluate Managements administration and
implementation of the social security programmes.
Governance structure
The Board should require Management to submit reports that assess the institutions efficiency
in performing its mandate, using a set of standards and benchmarks established by the Board.
Governance mechanism
The Board may prescribe standards and benchmarks for key areas of operations, including
efficiency in coverage and collection, operating expenses, adequacy and quality of service to
members, investment returns, prevention of fraud, and others.
The reports submitted by Management to the Board may be validated externally.
The Board should ensure that Management adopts a code of conduct and that the compensation
scheme for the employees of the institution provides the correct incentives for adherence to this
code of conduct and dedication to performance excellence.
pa r t A - b o a r d - A c c o u n t a b i l i t y
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Governance structure
The role of the Board in the investment decision-making process should be clear and
unambiguous.
There should be an external authority that has the mandate to take legal action against, or
exercise judicial authority over, the members of the Board for fraudulent investments.
Governance mechanism
The external authority may establish standards to evaluate the investment performance of the
fund.
Performance reports submitted by the Board to the external authority should be externally
validated.
The external authority may also establish a protection and legal defence programme for
whistleblowers.
The public may have access to the reports of the external authority.
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Open dissemination of key information about the social security institution does not necessarily imply
transparency. To be transparent, such information, which is a basic right for stakeholders, members
and beneficiaries of the social security scheme, should be timely, reliable, relevant, accurate and
objectively verifiable.
Transparency is of the highest importance to enlightened policy-making. It underpins and reinforces
the capacity of the stakeholders to hold responsible the persons entrusted with the management
and administration of the social security institution. It is a prerequisite to effective and meaningful
stakeholder participation. To the extent that it improves the availability and quality of market
information, transparency can significantly lower transaction costs.
The Board should conduct its business in a transparent way, and promote transparency in its
decision-making process and in its relationship with Management, members, beneficiaries and other
stakeholders of the social security programmes.
pa r t A - b o a r d - T r a n sp a r e n c y
Transparency
The suggested guidelines through which the Board may promote the principle of transparency in the
administration of a social security institution are discussed in the following pages.
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Governance structure
The public should be informed of the Boards policy on disclosure.
An external authority should validate the Boards policy on disclosure of information, including
those instances when the Board may choose to exercise discretion in providing information to
the institutions stakeholders.
Governance mechanism
When the Board chooses to exercise discretion in the disclosure of information, the external
authority may impose a time limit on the information embargo, beyond which the Board may be
compelled to disclose the information.
Governance structure
The public should be informed of the Boards code of conduct, including its policy on the
disclosure and management of conflicts of interest, through the Website and other publications
of the social security institution.
Board compliance with the code of conduct should be under the scope of the external authority
that exercises oversight on the social security institution.
Governance mechanism
The external authority may require the Board to report on its compliance with its code of conduct.
The public should have access to such reports.
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The Board should regularly, accurately and in a timely manner inform the stakeholders and
the general public on the status of the social security institution and its operations.
Governance structure
The Board should require Management to regularly submit timely reports that provide accurate
Governance mechanism
The reports submitted by Management to the Board should be validated by independent
pa r t A - b o a r d - T r a n sp a r e n c y
Governance structure
The Board should ensure that members are regularly informed about their programme benefits
and about any changes that will affect their current obligations and/or future benefits.
Governance mechanism
The Board should direct Management to provide the members of the social security institution
with complete and relevant information and easy-to-understand statements on the benefits due
them through educational campaigns and by any other means deemed appropriate.
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Predictability
The legislation, policy or decree that establishes the social security programme normally prescribes
its manner of financing and the benefits to be provided to the covered population.
Predictability refers to the consistent and uniform application of the law, including the rules and
regulations to implement it. Stakeholders are generally averse to sudden or unannounced changes
in contributions to and benefits from the programme. The methodical application of the programme
will strengthen stakeholder confidence and support for it.
Predictability underlines the importance of stakeholder consultation and consensus building prior
to the implementation of any change in the programme. An effective communications strategy and
public relations programme are important in keeping stakeholders informed of developments in the
social security scheme, and their impact on stakeholder rights and obligations.
The suggested guidelines through which the Board may promote the principle of predictability in the
administration of a social security institution are discussed in the following pages.
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Members and beneficiaries must be regularly and periodically informed of their duties and
responsibilities, as mandated by the legislation, policy or decree that establishes the social
security programmes.
Governance structure
The Board should ensure that Management regularly and periodically informs members and
pa r t A - b o a r d - P r e d i c t a b i l i t y
Governance mechanism
The Board may set standards and benchmarks to exercise oversight on Managements efficiency
Governance structure
The Board should ensure that Management regularly and periodically informs members and
Governance mechanism
The Board may set standards and benchmarks to evaluate Managements efficiency and
Governance structure
When the decisions of the Board have a direct impact on the contributions or benefits of any
of the social security programmes, the Board should direct Management to implement such
decisions prospectively and consistently, without affecting the rights already acquired by
programme members and beneficiaries.
Governance mechanism
Management should implement safeguards and measures to ensure consistent application
of Board decisions including, in particular, those that affect acquired rights of members and
beneficiaries.
There should be an Ombudsman or similarly authorized office to assist members and beneficiaries
in the filing and resolution of complaints against the social security institution.
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pa r t A - b o a r d - P a r t i c i p a t i o n
Participation
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Governance structure
An external, competent authority should ensure compliance with the mandated composition of
the Board, and ensure the conformity of the selection process to the established suitability and
competence standards for members of the Board.
It is incumbent upon a new Board member to ensure his/her knowledge of the duties and
responsibilities of the office, the working relationships with Management, with external offices
and with stakeholders.
Governance mechanism
Through their representatives on the Board, stakeholders may influence the administration and
management of the social security programmes in the promulgation of Board decisions which
Management is duty-bound to implement.
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Dynamism is the governance element of innovation or positive change, the effect of which is to
henceforth improve the performance efficiency of an organization.
Within the confines of the status quo, governance may well be in accordance with the principles of
accountability, transparency, participation and predictability. The principle of dynamism describes
the element in governance that improves on the status quo and enables the institution to be more
faithful to its mandate and to respond to the evolving needs of its members.
A newly appointed social security administrator may choose to maintain the status quo and, if the
previous administrator adhered to the principles of accountability, transparency, participation and
predictability, then good governance will continue to prevail within the organization. Alternatively,
the newly appointed authority may opt to improve on the status quo and, through various means,
motivate programme enhancements that build on the status quo. Once an innovation is introduced
and adopted, its positive effects can alter the institutions operating environment.
pa r t A - b o a r d - d y n a m i sm
Dynamism
The suggested guidelines through which the Board may promote the principle of dynamism in the
administration of a social security institution are discussed in the following pages.
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Governance structure
Cognizant of the length of time involved to effect changes in the legislation, policy or decree
that establishes a social security programme, a separate set of implementing rules and
regulations may be drawn up to cover the administrative and operative details that support the
legal framework of the social security programme.
Governance mechanism
The implementing rules and regulations of the social security programme may be defined by
Governance structure
The Board should promote innovation and positive change within the organization.
Governance mechanism
The composition of the Board should allow stakeholders, through Board representatives, to
propose innovations to increase the operational efficiency of the institution and improve the
implementation of its mandate.
The Board may direct Management to establish an evaluation and screening system to study the
merits, risks and feasibility of these proposals.
The Board may also directly encourage Management to propose innovations.
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Management
The Management is the group of persons who, under the legislation or by-laws establishing the
entity, is given the responsibility for the administration and daily operations of the social security
programme.
The guidelines for the Management are likewise drawn along the following five principles of good
governance:
pa r t A - M a n a g e m e n t
1. Accountability
2. Transparency
3. Predictability
4. Participation
5. Dynamism
The guidelines for Management are presented using the structure used for the Board guidelines, as
follows:
Statement of the guideline: The guideline will be stated as simply as possible.
Governance structure: This is the suggested structure that may support the application of the
guideline and facilitate the promotion of the underlying governance principle. A sound governance
structure is essential for the effective functioning of the social security institution. It should ensure
an appropriate division of operational and oversight responsibilities as well as the suitability and
accountability of the persons involved.
Governance mechanism: There are different ways through which a guideline may be implemented.
The suggested governance mechanisms are designed to ensure appropriate controls, communication
and incentives that would encourage good decision-making, proper and timely execution, and
regular review and assessment.
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Accountability
Governance structure
Usually, it is the Board that supervises and exercises oversight on the Management.
In some cases, an external supervisory authority may be tasked to supervise and exercise
Governance mechanism
The Board or external supervisory authority should conduct regular and periodic reviews of the
Governance structure
There should be a clear delineation of powers and responsibilities between the Head of
Governance mechanism
Functions delegated by the Head of Management to a committee or sub-group of senior officers
should be well-defined, documented, time-bound and subject to review and approval by the
Head of Management.
The Head of Management shall, at all times, be responsible for all delegated functions.
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The objectives and actions of the Head of Management and its senior officers should be
aligned with that of the Board in pursuit of the mandated mission of the social security
institution.
Governance structure
The Head of Management is accountable to the Board or to the designated authority, as
Governance mechanism
The Board or designated authority should establish standards and performance benchmarks to
pa r t A - M a n a g e m e n t - A c c o u n t a b i l i t y
Legislation, policy or decree may provide for the independence of the Head of Management
from political interference by prescribing the selection process and by defining the grounds
for removal from office solely for just cause.
Governance structure
The Board or an independent, competent external authority should ensure that the selection of
Governance mechanism
The selection and removal processes should be clear, documented and of public knowledge.
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Governance structure
There should be a competent authority (external or internal to the institution) to ensure
compliance of the selection process to the suitability and fit-and-proper standards for the
position of the Head of Management.
Governance mechanism
There should be clear, unambiguous and documented suitability and fit-and-proper standards
Governance structure
There should be an independent and competent external authority that is responsible to take
legal action, when necessary, against the Head of Management and/or its officers and staff.
Governance mechanism
The external authority should have investigative powers.
The external authority may establish a protection and legal defence programme for
whistleblowers.
Stakeholders should be aware of the process to file legal complaints against the Management.
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Governance structure
There should be an internal auditor and an external auditor who report directly to the Head of
Management.
There should be an independent, external custodian to hold and ensure the safety of the assets
of the social security scheme.
Governance mechanism
Both the internal and external auditors may be mandated to report to the external authority that
pa r t A - M a n a g e m e n t - A c c o u n t a b i l i t y
Governance structure
There should be an internal actuary and/or an external actuary, reporting directly to the Head of
Management, to perform regular and periodic actuarial reviews of the different social security
schemes.
Governance mechanism
Both the internal and external actuaries may be mandated to report to the external authority
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Governance structure
Risk management should be embedded in the organizational structure of the institution.
Management should ensure its competence to identify and evaluate any and all risks that may
affect the programme, and recommend to the Board the policies and measures to be taken to
protect the institution.
Management should assess the long-term and short-term impact of these risks on: (a) the
financial sustainability of the scheme; (b) fund investments, if any; (c) member contributions
and member benefits; and (d) the human resources and the ICT infrastructure required for
administering the programmes.
Governance mechanism
Management should require its senior officers to regularly and periodically submit studies and
reports that analyse the risks faced by the institution, recommend risk strategies, and implement
Board-approved measures to manage or avert any and all risks facing the institution.
The governance framework defined by the ISSA good governance guidelines may serve as a
reference to provide a comprehensive and systematic evaluation of the potential impact of risks
faced by the institution.
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Management should establish a code of ethics and a set of standards and benchmarks for its
officers and staff.
Governance structure
Management should require each unit of the institution to submit regular reports on the units
Governance mechanism
Management should establish and implement a planning and budget process, and a regular
pa r t A - M a n a g e m e n t - A c c o u n t a b i l i t y
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Transparency
Governance structure
The public should be informed of Managements policy on disclosure.
There should be complete transparency between the Board and the Management.
The disclosure policy of Management should comply and be aligned with that of the Board.
Governance mechanism
When Management chooses to exercise discretion in the disclosure of information, the external
authority or the Board may impose a time limit on the information embargo, beyond which the
Management would be compelled to disclose the information.
Governance structure
The Board should ensure that the Head of Management and its senior officers comply with the
Governance mechanism
All officers and staff of the Management should sign the code of conduct at the start of their
employment with the social security institution, and any changes thereto.
There should be an office that is responsible for monitoring and reviewing staff compliance
to the code of conduct, which may include prescribed standards and measures to ascertain
compliance to the code of conduct.
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The Management should regularly, accurately and promptly inform the stakeholders and the
general public on the status of the social security institution and its operations.
Governance structure
The Management should ensure that the stakeholders are informed in a regular and timely
Governance mechanism
The reports submitted by Management to the Board should be cross-validated within the
understand statements on the status of the institution and its operations through educational
campaigns and all appropriate communication channels available to the social security
institution including, in particular, a regularly updated Website.
The reports should be prepared using internationally accepted standards such as the GAAP and
the IFRS.
pa r t A - M a n a g e m e n t - T r a n sp a r e n c y
Governance structure
The Management should ensure that members understand and are regularly informed about
their programme benefits and about any changes that will affect their current obligations and/
or future benefits.
Governance mechanism
The Management should provide the members of the social security institution with complete
and easy-to-understand regular statements on the benefits due them, by any means deemed
appropriate, or at the request of members.
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Predictability
Governance structure
Management should adopt and implement measures to enforce the duties and responsibilities
Governance mechanism
Management should adopt standards and benchmarks to evaluate the efficiency, cost
Governance structure
The Management should adopt and implement measures to enforce the rights and privileges of
Governance mechanism
The Management should adopt standards and benchmarks to evaluate the efficiency, cost
effectiveness and consistency of application of measures to enforce the rights and privileges of
members and beneficiaries.
A planning, monitoring and review system should be in place to guide and assess actual versus
target performance to enforce these.
36
Governance structure
The Management should establish an information and communication system to efficiently and
effectively communicate with the stakeholders of the institution and the public at large.
Governance mechanism
The Management should adopt standards and benchmarks to evaluate the efficiency and
target performance.
pa r t A - M a n a g e m e n t - p r e d i c t a b i l i t y
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International Social Security Association
Participation
Governance structure
Management should have a dedicated unit in the organization that encourages an active
exchange with members, beneficiaries and other stakeholders on how the institution can better
serve them.
Management should ensure that stakeholders understand the programme and how it is being
administered, to enable their effective participation.
Governance mechanism
Management should adopt standards and benchmarks to evaluate the efficiency and effectiveness
Governance structure
Management should establish a process to expedite the evaluation of the merits and feasibility of
adopting stakeholder suggestions, which should include an approval system at the Management
and/or the Board level, prior to implementation.
Governance mechanism
Management should adopt standards and benchmarks to evaluate the efficiency and effectiveness
38
Governance structure
The Head of Management is often perceived to be the leader of the institution.
Heads of departments are likewise perceived by the staff as the leaders of their respective
departments.
Governance mechanism
pa r t A - M a n a g e m e n t - D y n a m i sm
Dynamism
A system should be embedded in the organizations structure that encourages and processes
new ideas.
The system should analyse the merits, risks, benefits and costs of a proposal and the feasibility
of its adoption.
Governance structure
Management should establish a process to expedite the evaluation of the merits and feasibility
of adopting suggestions from its officers and staff, which should include an approval system at
the Management and/or the Board level, prior to adoption and implementation.
Governance mechanism
Management should have a strong policy that supports the professional development and the
39
International Social Security Association
Introduction
Legislation, policy or decree establishes the breadth of a social security institutions functions and
responsibilities. There are social security programmes that are wholly budget-financed and hence
would have no mandate to collect contributions from the population to be covered. There are others
where the coverage and contribution collection functions are administered by an office that is separate
from the office that administers benefits and services functions. Some programmes are designed to
have no accumulated reserve funds, while others may be authorized to have internal or external
managers to manage fund investments. There are those that have fund management institutions
that are wholly separate and independent from those which administer member contributions and/
or benefits.
The ISSA Good Governance Guidelines for Social Security Institutions develops guidelines for six
pre-selected specific areas of social security administration. Depending on its mandate, some or all
of these guidelines may be relevant to a particular social security institution.
The six specific areas that are presently addressed in the guidelines are as follows:
1. Actuarial soundness
2. Enforcing the prudent person principle in investment management
3. Prevention and control of corruption and fraud in contributions and benefits
4. Service standards for members and beneficiaries
5. Staffing policies and performance appraisals
6. Investments in ICT infrastructure
The guidelines are drawn to support and promote the good governance principles of accountability,
transparency, predictability, participation and dynamism, as applied to social security institutions.
Each guideline is presented following the structure used in Part A, namely: (a) a statement of the
guideline; (b) governance structure and (c) governance mechanism.
42
Depending upon the legislation, policy or decree that establishes the social security programme,
the Board and the Management of a social security institution may be duty-bound to maintain an
adequate level of funding to deliver the promised benefits to members and beneficiaries of the
scheme, and to ensure the cost-effectiveness of the administration of the social security programme.
In this respect, the key challenges will include, among others: (a) defining and maintaining the
actuarial soundness of the fund; (b) adopting and complying with the actuarial measures; (c)
balancing the inflow of contributions and income from investments with the outflow of benefit
payments; and (d) benchmarking operating expenses.
In this section, some guidelines are provided to help ensure the actuarial soundness of a social
security programme.
pa r t b - A c t u a r i a l s o u n d n e ss
Actuarial soundness
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Governance structure
Legislation, policy or decree may set, and/or appoint an authority to set, the financial
Governance mechanism
The financial sustainability and actuarial measures of the social security programmes should be
well-defined and documented. These measures may include policies or rules-of-thumb on the
minimum actuarial life of the funds, a minimum funding ratio and/or benchmarks for returns
on fund investments.
A definition of what an actuarially sustainable programme means may be given.
The setting authority may prescribe a time period for the Board and the Management to act on
the findings and recommendations of the actuarial report.
The actuarial measures of the programmes should be published in easy-to-understand language
for the information of all stakeholders, in particular, with reference to how benefit entitlements
are determined vis--vis member contributions.
44
The social security programmes should have regular actuarial valuations to monitor the
sustainability of each one over time.
Governance structure
The Board and/or Management should ensure regular actuarial valuations of the social security
programmes.
The actuarial reports should be submitted to the Board and Management as well as to the
competent external authority that exercises supervision and oversight on the social security
institution.
There should be an independent office that regularly conducts actuarial reviews and actuarial
valuations of the different programmes.
pa r t b - A c t u a r i a l s o u n d n e ss
Governance mechanism
The social security institution should have access to the services of competent actuarial services,
whether internal or external, to conduct periodic actuarial reviews of the different programmes.
The preparation of the actuarial valuation reports should comply with international standards
such as those prescribed by the International Actuarial Association.
The Board and/or the Management may have an independent validation of the actuarial report.
The external authority may prescribe a time period for the Board and the Management to act
upon the findings and recommendations of the actuarial report.
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International Social Security Association
Governance structure
It is the responsibility of the Board and the Management to ensure that the promised benefits
are supported by the programme contribution rate to ensure the actuarial soundness of the
programme, as defined by its financial sustainability and actuarial measures.
The Board and/or the Management may propose to the designated authority changes in
contribution rates and/or benefit entitlements to ensure the financial sustainability of the
programmes.
Governance mechanism
The actuarial measures of the programmes may include benchmarks, leading indicators or trigger
mechanisms to indicate when and by how much contribution rates and/or benefit entitlements
should be adjusted to ensure the financial sustainability of the programme.
Governance structure
The Board or external competent authority should direct the Management to establish standards
and benchmarks to evaluate, monitor and review the investment performance of the funds.
Governance mechanism
The Management should evaluate, monitor and review the performance of its fund managers,
whether internal, external or both, to ensure that returns to member funds and the cost of fund
management services to members are within the prescribed standards and benchmarks.
Whether by policy or rule-of-thumb, a minimum rate of return on fund investments may be
established to ensure the financial viability of the programme (the so-called actuarial hurdle
rate) and/or ensure the sufficiency of accumulated member accounts for the contingencies
covered by the programmes.
46
in investment management
For social security institutions that have a mandate to manage the investment reserve funds of
the programmes, whether through internal and/or external fund managers, the Board and the
Management are duty-bound to ensure that the funds are invested in accordance with basic prudential
rules such as profitability, safety, liquidity and diversification.
There are many areas to be addressed in enforcing the prudent person principle. In this section,
guidelines are suggested in the following three areas: (a) institutions with internal investment units;
(b) institutions with external fund managers; and (c) institutions that have representation on the
boards of companies where they have significant asset holdings.
pa r t b - i n v e s t m e n t m a n a g e m e n t
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International Social Security Association
Governance structure
There should be minimum suitability standards for all staff in the investment unit.
They should have a code of ethics and conduct.
There should be an office external to the investment unit, to monitor compliance to the minimum
Governance mechanism
Management should establish standards and benchmarks to evaluate the performance of the
investment unit, noting that the performance evaluation period should take into consideration
the nature of the assets invested in.
Manuals of procedures should document how investment policies are to be implemented in
accordance with the prudent person principle.
Compliance with the manuals of procedures must be monitored and reviewed.
Staff compensation should provide the correct incentives to do right and not to do wrong.
The decision-making process must be clear and transparent.
The liability of the officers and staff of the investment unit must be clearly established.
48
The investment unit of the social security institution should efficiently implement the
investment policies set out by the Board or Management.
Governance structure
To establish clear accountability, the organizational structure of the investment unit should
reflect the investment decision-making process and should embed a system of checks-andbalances.
The Office of the Internal Auditor may dedicate competent staff to the investment unit.
There may be an office external to the investment unit to evaluate, monitor and review the
overall risk of the investment portfolio.
Governance mechanism
Management should establish standards and benchmarks to evaluate the performance of the
investment unit.
Manuals of procedures should document how investment policies are to be implemented.
Compliance with the manuals of procedures must be monitored and reviewed.
Staff compensation should provide the correct incentives to do right and not to do wrong.
The liability of the officers and staff of the investment unit must be clearly established.
pa r t b - i n v e s t m e n t m a n a g e m e n t - i n t e r n a l u n i t s
The Board and the Management should have the technical expertise to determine
whether investment proposals have undergone due diligence, and should act upon their
determination.
Governance structure
The investment unit should have a clear, implementable and verifiable definition of what
due diligence means in general, and set due diligence guidelines for each type of investment
instrument, in particular.
The investment unit should have clear, transparent and verifiable methods to implement the due
diligence guidelines set by the Board and/or Management.
A competent office external to the investment unit should monitor compliance to the due
diligence guidelines. This may be the internal or external audit office.
Governance mechanism
There should be manuals of procedure on how to conduct due diligence across all types of
do wrong.
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International Social Security Association
Governance structure
There should be a unit external to the investment unit to ensure that the investment unit
complies with international market standards in the valuation of the investment portfolio, and
in the management and disposal of illiquid assets.
Governance mechanism
Management may prescribe the use of GAAP and IFRS for the valuation of the institutions
investment assets.
The investment unit should have a manual of procedures consistent with international best
practices on the valuation methodology of investment assets, and the management and disposal
of illiquid assets.
There should be a manual of procedure consistent with international best practices on the
marking-to-market of the institutions investment assets, and the establishment of allowances
for probable loss.
Governance structure
There should be an independent custodian appointed, reporting directly to the Board and/or the
Governance mechanism
The custodian should check regularly the assets under custody against the accounting registration
50
Governance structure
To enhance accountability, transparency and predictability, there should be a written process,
established in the by-laws of the social security institution, to select its external fund managers
and to establish the type of mandate given to them.
The Board should direct Management to document and implement the policies, criteria and
requirements to support the mandated process.
The Office of the Internal Audit may be part of the checks and safeguards to ensure compliance
to the process.
Governance mechanism
The Board and/or Management should establish minimum suitability standards, performance
managers.
Targets, standards and benchmarks should be established to evaluate the performance of
each external fund manager, noting that the performance evaluation period should take into
consideration the nature of the assets invested in.
pa r t b - i n v e s t m e n t m a n a g e m e n t - i n t e r n a l u n i t s
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International Social Security Association
Governance structure
The Board should establish the policy that sets the standards, criteria and benchmarks for
the evaluation of the external fund managers, in terms of variables such as fees, returns and
portfolio composition, among others.
Management should ensure that said policy is implemented and adhered to by the external fund
managers.
Governance mechanism
The Board and/or Management should establish targets, standards and benchmarks to evaluate
the performance of external fund managers above or below pre-set standards or benchmarks,
noting that the performance evaluation period should take into consideration the nature of the
assets invested in.
Governance structure
A custodian appointed or approved by the Board should be appointed for the safekeeping of the
institutions assets.
The custodian should be independent and not related to the business interests of the external
fund manager.
Governance mechanism
The custodian should check regularly the assets under custody against the accounting registration
of transactions and balances, and regularly report to the Board and/or the Management of the
social security institution.
52
Governance structure
There should be a clear, written policy on the role that the institution should play on the Boards
Governance mechanism
Verifying the alignment and compatibility of the social security institutions objectives with
that of the companys should be part and parcel of the due diligence process of the Board and
Management.
The Board must have a system in place to verify that its representatives on Boards of companies
uphold the interest of the institution at all times.
The Board should have a policy to publish how its representatives on Boards of companies have
exercised their votes.
There should be a clear policy on the incomes and/or profits that Board members are entitled to,
if any, by virtue of their board membership in these companies.
pa r t b - i n v e s t m e n t m a n a g e m e n t - e x t e r n a l f u n d m a n a g e r s
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International Social Security Association
54
The Board and the Management should protect the social security institution from all forms
of corruption and fraud in the collection of programme contributions.
Governance structure
The Board should establish the policies and measures to be implemented by the Management to
Governance mechanism
The Management should design and implement systems and procedures to circumvent all
known and potential modes of corrupt and fraudulent activities in the collection of programme
contributions, focusing on core values which should constitute the basis for the daily operation
of the institution, such as impartiality, legality and integrity.
The following mechanisms may be established:
a. A tamper-proof system of member identification
b. Checks-and-balances at key points in the collection process
c. Simplified and documented procedures to minimize areas of staff discretion
d. Automation of the collection process to facilitate direct remittance of contributions to the
social security institution and to minimize human intervention
e. Publicity of payment procedures to increase the vigilance of paying members against
fraudulent practices
f. Regular statements of account sent to members to verify the correctness of their contribution
records
g. Prosecution of entities who engage in fraudulent activities
h. Enforcement of compliance through strengthened inspection
i. Cross-checking of contribution records with data from other authorities
pa r t b - P r e v e n t i o n a n d c o n t r o l o f c o r r u p t i o n a n d f r a u d
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International Social Security Association
Governance structure
The Board should establish the policies and measures to be implemented by the Management to
Governance mechanism
The Management should design and implement systems and procedures to circumvent all known
and potential modes of corrupt and fraudulent activities in the payment of benefits.
The following mechanisms may be established:
a. A tamper-proof system of beneficiary identification
b. Regular verification of the prevalence of the beneficiarys condition on which the benefit
entitlement is based
c. Checks-and-balances at key points in the benefit payment process
d. Simplified and documented procedures to minimize areas of staff discretion
e. Automation of the benefit distribution process to minimize human intervention
f. Publicity of payment procedures to increase the vigilance of beneficiaries against fraudulent
practices
g. Regular statements of account sent to beneficiaries to verify the correctness of their benefit
entitlements
h. Access to an Ombudsman or a similar authority to assist members and beneficiaries in the
filing and resolution of complaints against the institution
i. Prosecution of entities who engage in fraudulent activities
j. Reconciliation of bank accounts in charge of benefits payments, regarding resources
received from the social security institution and payments made
56
beneficiaries
The raison dtre of a social security institution is to administer the rights and obligations of
members and beneficiaries. Efficient administration and the provision of quality service strengthen
the credibility of the institution and enhance member and beneficiary support for it.
In this section, some suggested guidelines are developed in providing quality standards to programme
members and beneficiaries.
pa r t b - P r e v e n t i o n a n d c o n t r o l o f c o r r u p t i o n a n d f r a u d
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International Social Security Association
Governance structure
The Board and/or the Management should put in place an efficient, cost-effective and
streamlined organizational structure that provides members with quality service in the collection
of programme contributions.
The organizational structure should be staffed by competent officers and personnel, and a
responsive ICT infrastructure.
Help desks, one-stop assistance centres and a responsive institutional Website can facilitate
and expedite the handling of inquiries, requests and complaints concerning member accounts.
A unit external to the collection unit should monitor and audit performance.
Governance mechanism
The Management should establish a set of quantitative and qualitative standards and benchmarks,
including manuals of procedures, to ensure efficiency and consistency in the delivery of quality
service in the collection process.
Indicators may be set to trigger the use of corrective measures when observed deviations exceed
these standards and benchmarks.
There should be cross-linkages to benefit distribution services to facilitate determination of an
individuals benefit entitlements vis--vis contribution record.
58
The social security institution should provide its members with quality service in the
distribution of programme benefits.
Governance structure
The Board and/or Management should put in place an efficient, cost-effective and streamlined
organizational structure that provides members with quality service in the distribution of
programme benefits.
The organizational structure should be staffed by competent officers and personnel, and a
responsive ICT infrastructure.
Help desks, one-stop assistance centres, and a responsive institutional Website can facilitate
and expedite the handling of inquiries, requests and complaints from member beneficiaries.
A unit external to the benefits distribution unit should monitor and audit performance.
Governance mechanism
Management should establish a set of quantitative and qualitative standards and benchmarks,
including manuals of procedures for all types of member benefits and services, to ensure
efficiency and consistency in the delivery of quality service in the distribution and payment of
benefits.
Indicators may be set to trigger the use of corrective measures when observed deviations exceed
these standards and benchmarks.
There should be cross-linkages to contribution collection services to facilitate determination of
an individuals benefit entitlements vis--vis contribution record.
pa r t b - S e r v i c e s t a n d a r d s f o r m e mb e r s a n d b e n e f i c i a r i e s
The Board and the Management should continually aim to improve and to develop new
services for members and beneficiaries.
Governance structure
Board representatives of stakeholders may provide feedback on how member services may be
improved.
The Management may establish a unit dedicated to process suggestions from within and outside
the institution, and to develop new service products for members and beneficiaries.
Governance mechanism
The Board and/or Management should introduce cost-effective innovations that improve on the
appraisals
The Board and Management must ensure the availability of competent and motivated staff to
support programme administration and operations. Human resource (HR) management attracting,
retaining, training, mentoring and compensating expert, loyal and motivated staff is key to the
successful governance of any organization.
There are many areas to be addressed in the area of staffing policies and performance appraisals. Some
guidelines are suggested on recruitment, performance appraisals and the promotion of corporate values.
60
The institutions human resource policies, rules and regulations should be fair, impartial,
well-defined, documented and widely disseminated to all the organization staff to protect
the integrity of the recruitment process, to minimize political considerations and to enhance
transparency and predictability. These should include a policy of employment equity and
protection against harassment.
Governance structure
The Board and/or Management should establish the recruitment, selection and promotion
policies for senior and rank-and-file positions in the organization, for the compliance of all
personnel.
The Board and/or Management may designate the office to implement the recruitment, selection
and promotion policies; to establish safeguards to protect the integrity of the process; and to
ensure that evaluations are based on merit and protected from lobbying or influence.
The Board and/or the Head of Management should be designated as the approving authority for
staff appointments.
The Office of the Internal Audit may serve to check and safeguard the recruitment, selection and
promotion process.
An external authority may be designated to receive and resolve complaints.
Governance mechanism
HR policies on recruitment, selection and promotion should be documented and widely
pa r t b - S t a f f i n g p o l i c i e s a n d p e r f o r m a n c e a pp r a i s a l s
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International Social Security Association
Governance structure
The Board should direct Management to establish a staff performance appraisal system.
Management should designate the office to implement staff performance appraisals.
The Office of the Internal Audit may serve as part of the checks and safeguards of the appraisal
system.
An external authority may be designated to receive and resolve complaints.
Governance mechanism
The staff appraisal system should provide the right incentives to promote excellence in staff
performance.
It should be documented, well-understood and widely disseminated. The staff should receive
orientation and training on the performance appraisal system.
It should include objective and verifiable performance criteria, a clear assessment of staff
development needs, and a feedback mechanism at least between the evaluator and the staff.
Performance ratings should be linked to staff compensation, promotions and/or the institutions
staff succession plan.
The Board and/or Management should ensure that the staff incentive and promotion process is
independent from lobbying or political influence.
62
The Management should ensure that the officers and staff are loyal to the institution and its
mandate.
Governance structure
An office should be designated to promote and monitor compliance to the code of conduct.
The Office of the Internal Audit may be part of the checks and safeguards in promoting the code
of conduct.
An external authority may be designated to receive and resolve complaints.
Governance mechanism
The Board and/or Management should establish a code of conduct for the officers and staff of
the institution.
The code of conduct should be documented, well understood and widely disseminated.
The staff should receive orientation, training and periodic refreshers on the code of conduct.
pa r t b - S t a f f i n g p o l i c i e s a n d p e r f o r m a n c e a pp r a i s a l s
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Governance structure
The Board and/or Management, with the assistance of the institutions ICT unit, should establish
the standard policies and procedures, including the evaluation and approval system, that apply
to investment proposals for new ICT infrastructure.
These policies have to take into account not only short-term goals but also medium-term services
and prospective technology developments.
To establish accountability, the roles and responsibilities of the units in the institution that are
involved in the evaluation and approval process should be well-defined and documented.
The ICT unit should implement and coordinate the implementation of this system.
The Office of the Internal Audit may be part of the checks and safeguards to verify compliance
to the established system of evaluation and approval.
Governance mechanism
Management may prescribe a standard set of documents to support the ICT investment proposal.
pa r t b - I n v e s t m e n t s i n ICT i n f r a s t r u c t u r e
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International Social Security Association
Governance structure
The ICT unit, in coordination with other units in the institution, should define service performance
goals in the context of projects and medium-term plans for improving social security services.
The Office of the Internal Audit or a unit external to the ICT unit should be tasked by Management
with the responsibility to conduct a post-evaluation of new ICT investments to ensure that the
promised benefits and services are delivered within the projected time frame, as justified by the
project proposal.
The intended users, beneficiaries and/or stakeholders should provide feedback as part of the
ex-post evaluation of the new ICT investment.
Governance mechanism
The Management may set up a standard procedure to conduct post-evaluations of (new) ICT
investments, including all the tasks involved in the ICT operation and usage, to assess actual
versus expected service delivery as contained in the project proposal.
In order to facilitate these validations, the concrete goals of the project should be specified a
priori including the associated infrastructure Service Level Agreements.
66
The Management should ensure the integrity of existing ICT infrastructure and avert any
threat of system failures. The overall goal is to ensure the high availability of the social
security services.
Governance structure
The ICT unit should develop business continuity plans to ensure service availability at all times.
There should be a unit external to the ICT unit of the institution that should periodically conduct
Governance mechanism
The ICT unit should develop medium-term plans for the management of ICT infrastructure and
resources.
Its business continuity plans should anticipate possible contingencies and should take into
pa r t b - I n v e s t m e n t s i n ICT i n f r a s t r u c t u r e
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Selected references
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Bebzuk, R.; Musalem, A. R. 2008. Public pension funds around the world: Governance, investment
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Carmichael, J.; Palacios, R. 2004. A framework for public pension fund management, in A.R.
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Gibbon, C. 2009. Seven steps that social security and social services organizations can take to
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Kehoane, R. 2001. Governance in a partially globalized world, in American Political Science
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Litan, R. E.; Pomerleano, M.; Sundararajan, V. 2002. Strengthening financial sector governance
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Technical Seminar on ICT, Beirut, 22-23 June). Geneva, International Social Security Association.
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World Bank. 1993. Governance: The World Banks experience. Washington, DC.
Yelmo, J. C. 2009. ICT as a strategic management tool Introductory report (ISSA International
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Yermo, J.; Marossy, A. 2002. Pension fund governance (Room document No. 3, 2nd OECD Conference
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International Social Security Association 2011. Photos: Neustockimages; iStockphoto.com; ingimage; PhotoDisc