Executive Compensation and Everybody Else
Pension fiduciaries inside a company have a tough life. They are tasked with making multi-million dollar decisions at the same time that they are seldom rewarded for the time and energy required to do an excellent job. What's odd is that so few people pay attention to all things "fiduciary" in terms of how these individuals get selected, compensated and evaluated for performance. In contrast, extensive time and money is expended in an effort to determine the optimal pay package for an executive (including pension benefits), how to gauge leadership acumen and when to pull the chord on the golden parachute.
Several questions come to mind. Are fiduciaries getting paid enough? Do they have an appropriate educational and experiential background to decide how to properly select and review external money managers, assess operational controls, determine suitability of 401(k) investment choices, evaluate plan performance, interpret actuarial estimates of explicit and pseudo liabilities, identify hidden risks and otherwise carry out their fiduciary duties? How should they be rewarded for a job well done? Should the job of pension fiduciary be a full-time position? Should information about who serves as a pension fiduciary be made public to shareholders and other interested parties? Should C-level executives and board members be made more accountable for pension fiduciary recruiting and decision-making? Is it time for a "fiduciary expert" that parallels the notion of a financial expert, a la Sarbanes Oxley?
There are a few training programs that specifically address retirement fiduciary concerns. Stanford University Law School has Fiduciary College and Peter Hapgood, president of Public Pensions Online, is working on the municipal side with several public fund organizations. The U.S. Department of Labor established "Getting It Right" several years ago.
Notwithstanding these efforts, I think it would be fair to say that fiduciary management has a long way to go. If there was ever a time when the issue of defined benefit and defined contribution plan stewardship deserves examination, now is that time. With so much at stake, why wait?
For a discussion of the topic of fiduciary compensation, see "Do Fiduciaries Need Better Incentives to Make the Retirement System Work?", co-authored with Wayne Miller (Executive Decision Magazine, January/February 2006).
Several questions come to mind. Are fiduciaries getting paid enough? Do they have an appropriate educational and experiential background to decide how to properly select and review external money managers, assess operational controls, determine suitability of 401(k) investment choices, evaluate plan performance, interpret actuarial estimates of explicit and pseudo liabilities, identify hidden risks and otherwise carry out their fiduciary duties? How should they be rewarded for a job well done? Should the job of pension fiduciary be a full-time position? Should information about who serves as a pension fiduciary be made public to shareholders and other interested parties? Should C-level executives and board members be made more accountable for pension fiduciary recruiting and decision-making? Is it time for a "fiduciary expert" that parallels the notion of a financial expert, a la Sarbanes Oxley?
There are a few training programs that specifically address retirement fiduciary concerns. Stanford University Law School has Fiduciary College and Peter Hapgood, president of Public Pensions Online, is working on the municipal side with several public fund organizations. The U.S. Department of Labor established "Getting It Right" several years ago.
Notwithstanding these efforts, I think it would be fair to say that fiduciary management has a long way to go. If there was ever a time when the issue of defined benefit and defined contribution plan stewardship deserves examination, now is that time. With so much at stake, why wait?
For a discussion of the topic of fiduciary compensation, see "Do Fiduciaries Need Better Incentives to Make the Retirement System Work?", co-authored with Wayne Miller (Executive Decision Magazine, January/February 2006).
