Pension Fund and Lorporate Governance
Date Issued
2005
Date
2005
Author(s)
Lee, Jih-Shyuan
DOI
zh-TW
Abstract
Corporate governance has become an issue of international concern and many countries are actively engaged in a reform program to ensure their practices meet international standards. In this the role of shareholders is considered critical, and much attention has been focused upon the international investors’ concerns. What is equally important is the role that domestic institutions can play in promoting corporate governance reform. In this study, I briefly map out the trends in pension fund asset growth which bring them to a potentially dominant position in ownership in many markets and playing an increasingly important role as both channels for retirement savings and as intermediaries in financial markets. This combined role makes them a prime concern of governments and regulators from a variety of perspectives. Considering recent developments in corporate governance reform relevant to developing countries, and how pension fund reform can promote corporate governance reform in a mutually reinforcing sets of initiatives.
But, it is clear that if pension fund are constrained by conflict of interest, and do not ensure professional competence in management, investment and administration, and operate without clear mechanisms of accountability, and transparency, the governance problems which undermine the corporate can undermine the effectiveness of the pension fund. Many of the same governance problems apply. Principal-agent problems, agency cost, asymmetry of information, conflicts of interest can equally apply to the governance of pension funds. The costs of this agency problems, the inefficiencies resulting from asymmetry, and potential conflict of interest can result in the pension fund allocating funds inefficiently, tolerating poor management performance, making inadequate provision for risk management and ultimately contributing to lower returns and poor reputation with the beneficiaries. These are all problems which have had to be faced in developed markets, with scandals, poor performance, and loss of confidence by the public and beneficiaries.
Fortunately, the outpouring of pension fund activism-led largely by public pension funds in both the US and UK – has led to a vigorous debate on the role and responsibilities of institutional investors. The notion is that the character of pension fund investors can provide the role of ‘guardian’ in the private sector, where the state is unwilling and unable to provide effective oversight. The question now for policy maker establishing or reforming our own pension system is how to ensure that the government framework for pension funds fosters an active role in corporate governance.
The results from this study would be develop recommendations on best practice in pension fund governance and basic requirements to ensure that pension funds are suited to play an active role in corporate governance.
Subjects
退休基金與公司治理
Pension Fund and Lorporate Governance
Type
other
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