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Pension Fund Governance: Challenges and Potential Solutions

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Author Info
Fiona Stewart
Juan Yermo
Abstract

Good governance is increasingly recognized as an important aspect of an efficient private pension system, enhancing investment performance and benefit security. Yet, despite regulatory and industry initiatives, governance weaknesses persist across OECD and non-OECD countries. This paper highlights the main governance challenges faced by policymakers (particularly with trust-based pension systems), and draws on recent policy initiatives to propose possible solutions to strengthen governance arrangements. The paper suggests that some of the more serious cases of governance failures could be solved through a more balanced representation of stakeholders in the governing body, higher levels of expertise (which may be achieved via training or the use of independent trustees) and the implementation of codes of conduct addressing conflicts of interest. The absence of governance arrangements for defined contribution style pension plans also needs to be addressed, potentially via management committees, increased fiduciary responsibility for relevant parties or via a strengthened role for pension supervisory authorities. Consolidation of the pension industry in some countries may also be required to achieve economies of scale and reduce costs, which in turn would allow pension funds to dedicate more resources to strengthening their internal governance.

La gouvernance des fonds de pension : défis à relever et solutions envisageables
La bonne gouvernance est de plus en plus considérée comme un aspect important de l‘efficience des régimes de retraite privés, car elle accroît les performances des investissements et la sécurité des prestations. Malgré les initiatives adoptées sur le plan réglementaire et par les professionnels, la gouvernance reste néanmoins défaillante dans les pays membres et non membres de l‘OCDE. Ce document met en relief les principaux défis qui se présentent aux responsables politiques dans ce domaine (notamment en cas de gestion sous mandat) et il s‘appuie sur des mesures récentes pour proposer des solutions de nature à renforcer les dispositions relatives à la gouvernance. Il semblerait que l‘on puisse remédier à certaines des failles les plus préoccupantes des dispositifs en place en introduisant une représentation plus équilibrée des parties prenantes au sein de l‘organe de direction, en relevant le niveau de compétence (par la formation ou en faisant appel à des administrateurs indépendants) et en adoptant des codes de conduite qui abordent la question des conflits d‘intérêts. Il convient également de pallier l‘absence de dispositions ayant trait à la gouvernance pour les plans de retraite à cotisations définies, par exemple en instaurant des comités de gestion ou en accroissant la responsabilité fiduciaire des parties concernées ou le rôle des autorités de contrôle du secteur des retraites. Dans certains pays, la concentration des intervenants sur ce marché peut aussi s‘avérer nécessaire pour réaliser des économies d‘échelle et réduire les coûts, ce qui permettrait aux fonds de pension de consacrer davantage de ressources à la consolidation de leur gouvernance interne.

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File URL: http://dx.doi.org/10.1787/241402256531
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Paper provided by OECD, Directorate for Financial and Enterprise Affairs in its series OECD Working Papers on Insurance and Private Pensions with number 18.

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Date of creation: Jun 2008
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Handle: RePEc:oec:dafaab:18-en

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Related research
Keywords: conflicts of interest; fiduciary responsibility; governance; pension fund; trustee; administrateur; conflits d’intérêts; fonds de pension; gouvernance; responsabilité fiduciaire;

Find related papers by JEL classification:
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions

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