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Are managers paid for better levels of pension funding?

Author

Listed:
  • Alderson, Michael J.
  • Betker, Brian L.
  • Halford, Joseph T.

Abstract

Despite the evidence that full funding of defined benefit pension obligations is value maximizing, managerial price and volatility sensitivities (deltas and vegas) do not appear to influence funded status for all except the CFOs of plan sponsors with weak credit ratings (Anantharaman and Lee, 2014). Whether realized total compensation (as opposed to changes in the value of securities held) encourages full funding is an open question. Here we examine the empirical relation between realized managerial compensation and the extent to which plan liabilities are funded, and find that CEO pay bears a significant relation with funded status.

Suggested Citation

  • Alderson, Michael J. & Betker, Brian L. & Halford, Joseph T., 2017. "Are managers paid for better levels of pension funding?," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 25-33.
    • Handle: RePEc:eee:corfin:v:46:y:2017:i:c:p:25-33
    DOI: 10.1016/j.jcorpfin.2017.06.014
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate pension policy; Managerial incentives; Executive compensation; Unfunded pension liabilities;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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