Pension Fund Governance

Pension Fund Governance

A Global Perspective on Financial Regulation

Edited by John Evans, Michael Orszag and John Piggott

The academic literature on pension governance is sparse and this book will fill some important gaps by bringing together original contributions from around the world on subjects related to the area. The book initially lays out the main frameworks for pension fund governance and then goes on to examine global governance practice and experience and country studies on pension funds in the United States and Australia. The final section of this in-depth study discusses the role of government guarantees.

Chapter 1: Introduction

John Evans, Michael Orszag and John Piggott

Subjects: economics and finance, financial economics and regulation, welfare economics

Extract

John Evans, Michael Orszag and John Piggott Global pension fund assets amounted to over US$23 billion in 2007, and that is before the substantial amount of pension savings in insurance vehicles is taken into account. There are few markets across the major developed economies in which pension and life insurance assets combined do not represent more than half of all financial assets; in some countries they comprise more than four-fifths of all assets under management. Corporate and government pension funds often do not have assets on hand to meet all their liabilities, so assetbased measures potentially understate the importance of pensions and pension funds to economies. Pension funds and long-term pension-related savings vehicles are key investors in financial markets and critical in providing retirement incomes. Good governance of pension funds is therefore crucial, not only in protecting the interests of contributors, but also in advancing good governance at the enterprise level. We need to keep in mind that for many large corporations, benefits and pension obligations are a significant fraction of their total overall obligations, and therefore an important component of corporate governance in their own right. Yet there are plenty of disappointments in pension fund governance. Corporate pension funds rarely play an important role in advancing broader corporate governance agendas. Instead, most of the activist pension fund investors tend to be public investors such as the California Public Employees’ Retirement System (CalPERS). But for every activist public pension fund with a strong corporate governance agenda, there are many...