Bad company. The indirect effect of differences in corporate governance in the pension plan industry |
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| Institution: | 1. QUT Business School, Queensland University of Technology, Brisbane, Australia;2. Victoria Business School, Victoria University of Wellington, Wellington, New Zealand;3. School of Business, Wellington Institute of Technology, New Zealand;4. Asia-Pacific Information and Media Union, Australia;1. University of Nottingham Ningbo, China;2. Southwestern University of Finance and Economics, China;3. University of Nottingham Ningbo China, Taikang East Road, Yinzhou, Ningbo, China;1. Economic Research and Regional Cooperation Department, Asian Development Bank, Metro Manila 1550, Philippines;2. University of Sydney Business School, University of Sydney, Camperdown, NSW 2006, Australia;3. School of Business, Western Sydney University, Parramatta, NSW 2150, Australia |
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| Abstract: | This paper analyses the role played by pension plan governance structure and how it impacts on plan fees and plan performance. The results clearly show that fees decrease significantly and performance improves when pension plan governance structures permit full alignment of interests and allow greater capacity for the decision-makers to monitor and discipline the managers. It is also observed that companies managing both employee and individual funds, tend to exploit differences in the internal corporate governance mechanisms of each type of plan in order to nurture employer-sponsored plans at the expense of individual plans. These results suggest that internal corporate governance mechanisms allowing closer alignment with the interests of participants would be preferable to focusing exclusively on setting the minimum proportion of independent directors. |
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