Where Do Pensions Stand on Post-Crisis Reforms?

Please read my latest entry and post your comments here:

http://pensionpulse.blogspot.com/2010/03/where-do-pensions-stand-on-post-crisis.html

Thank you,

Leo Kolivakis

Comments

[Leo Kolivakis]

"Believe me, pissing off a powerful CEO or politician is not a career-enhancing move in the clubby investment industry."

Captain Willard,

I believe you since I've pissed off my share of pension fund presidents and have been blacklisted from every major investment firm in Canada. Doesn't help that I also suffer from secondary progressive MS and employers see me as a liability. So be it, I can't change their attitudes. I will keep writing what's on my mind and expose the con games taking place at these public pension funds.

As far as the agency problem, I completely agree with you. At least hedge funds and PE funds have skin in the game. Pension fund managers here in Canada are incentivized to take big risks with people's retirement funds, and when things go wrong, they fall back on four year rolling returns. Try going to a hedge fund manager and ask them if you can be evaluated on a four year rolling return. They'll laugh at you and escort you out the door.

[Captain Willard]

Leo - this is a classic "agency" problem. I will limit my comments to the US, because it is a system I understand well.

The fund managers get hired by agents - consultants, or mutual fund boards. The Consultants (shockingly ignorant whores, for the most part)are agents hired by other agents - plan sponsors. The plan sponsors are agents hired by, or answering to, big corporations or politicians or both.

Everybody involved is a careerist agent, acting to maximize his/her utility. Proper governance requires aggressive advocacy - speaking truth to power, as it were. This pisses off powerful people. Believe me, pissing off a powerful CEO or politician is not a career-enhancing move in the clubby investment industry. (I once pissed off a very powerful bank CEO a long time ago by questioning a dubious transaction at an analyst meeting. You can bet I heard an earful from my bosses the next day.)

So nobody is watching the store because of these agency effects. Although this was not true in the past, today the most aggressive shareholder rights advocates are usually Taft-Hartley/Union plans and faith-based organizations. Why? Because they are principals, not agents, and they have some solidarity with their clients or are upholding their view of morality.

We will get better governance after more pain. When people realize the extent of the crisis you are doing a great job reporting, there will be some improvement. But the extent of the mismanagement of pensions is still poorly understood. And there has also been a lot of outright crime.

[greenfire]

Perhaps the more important question is how does the public feel about greater taxation of the wealthy and shutting down the offshore tax havens.  More importantly, however, would be to deal with the profound inequity between CEO and worker pay in American buisness.  Let's see to it that CEO's make 10-20 times as much as common employees, rather than the current 600 times pay. 

I'm not falling for the pathetic efforts of shows like "Undercover Boss" or whatever it's called, that paint pictures of managers as friendly, affable types getting to know the "common" man or woman.  What a pathetic bunch of hogwash.  We end Milton Friedman and his followers reign of social Darwanistic terror on people now, or the working and middle classes are toast.

Let's do all that, and then re-examine the pension thing.  Oh, I'm sorry.  Does that just drive capital away.....  Good riddance.  There is little to the so-called science of economics that applies to the rapidly changing world in which we live today.  The wealthy and their progeny are welcome to the pleasures of the looming die-off.  That's a particularly ironic point, since their parents' excess and short-sightedness is what largely makes that scenario most real.  Take your Mish-talk over to his blog, where it fits the ideology better.

On second thought, let's just have the Rethugs roll out the proposed American austerity plan, and watch the fireworks.  It should be a load of fun.

[Leo Kolivakis]

Well said. Does any CEO in corporate America really deserve to make hundreds of times the pay of an assembly line worker? You don't have to be a Christian, a Jew, a Muslim, a Hindu, an agnostic or whatever to say "hell no!". But in the religion of the financial and corporate kleptocrats, they really think they deserve to be paid these obscene amounts. There is no shame on Wall Street or corporate America. It's too bad because the financial/ business elites once had moral suasion, now they are just moronic.

[greenfire]

Sorry, as a public servant (firefighter), I get my hackles up with all the talk around Greece, Ireland, Latvia et. al.  We take the IMF austerity talk as the only medicine for what ails the debtor nations, yet that only represents one narrow Wall Street ideology.  I think we're missing the point, and we'll see soon enough many nations with much less government, including no government. This ideology is killing people right now, and shows no creative means of solving the problem.  Continued expansion of credit....yeah, riiiight.

[Rainman]

Most public pension funds couldn't pass a scratch 'n sniff reform test in their own right. They are the last ones who will beat the drum for reforms.......pre-collapse, that is.

[Leo Kolivakis]

Rainman,

I am afraid you're right. Moreover, they all scratch each other's back in the financial world. The boards at large public pension funds (especially here in Canada) are infested with industry hacks who think that just because you manage big money, you deserve huge bonuses. Very few board of directors ask very tough questions from their pension fund managers. They basically rubber stamp everything, and when something goes wrong, they sweep it under the rug.