I consider myself a relatively smart person, certainly (hopefully) smart enough to know when I don't know something. What falls in the category of "don't count on me?" Well, besides the fact that my husband begs me NOT to cook EVER again (my efforts being relatively inedible that is), I know very little about sports. Indeed, if ever asked to appear on Jeopardy, "sports" would be my Achilles' Heel. This doesn't mean that I disdain sports. To the contrary, I am learning to play golf, I take yoga classes (not quite a "sport") and I love to exercise. I hope to take up tennis when I have more free time.
That said, what does remain a complete mystery to me is the fascination with fantasy football (and equivalents for other sports). I know it's a popular pastime. My nephews and more than a few colleagues (mostly male) play for hours. WikiAnswersTM puts the number of worldwide players at 30 million. According to Fox Sports, "While only a select few extremely wealthy individuals have the privilege of owning a real NFL team, anyone can enjoy the thrill of owning a team of NFL players by playing fantasy football." Still, one wonders. Why not just watch football on television or in person or go out and play a game with friends? Doesn't the "real thing" offer a superior experience?
As I ruminated on the mysteries of fantasy football the other day (after the topic arose in conversation), it struck me that pension fiduciaries might learn a thing or two by simulating a "dream team" and watching their progress in moving the "ball" (effective pension governance) down the field. From his comments in "Pension funds get code of conduct from money manager group," it sounds like pension scholar Keith Ambachtsheer agrees that structural changes must be made to ensure proper pension governance. Pensions & Investments reporter Jennifer Byrd quotes this author of Pension Revolution: A Solution to the Pensions Crisis as saying "The truly best practice, and what pension funds need, is a corporate structure" that relies on knowledgeable professionals to run the plan with oversight from the board. This contrasts with "the current system of lay individuals being named trustees and then looking to outside experts for assistance."
(This blog will talk about the final Code of Conduct in a subsequent post. For now, readers can download the document from the CFA Institute website.)
Fiduciary dysfunction is not a new topic but is nevertheless extremely important. Two years ago, pension professional Wayne Miller and Dr. Susan Mangiero wrote "Do Fiduciaries Need Better Incentives to Make the Retirement System Work?" (Executive Decision, January-February 2006). Here is an excerpt.
<< Imagine a time in the not too distant future. Retirement systems everywhere are in disarray. An outside specialist is asked to diagnose the problem and suggest a cure. A capitalist at heart, solutions-oriented and cognizant of a fiduciary imperative, she identifies the usual suspects—complex regulations, compelling demographics and overly optimistic economic assumptions.
Then, defying conventional wisdom, she asks the unthinkable. Has anyone looked at the role of fiduciary incentives? Do those in charge get rewarded for what they do well or penalized for what they fail to do? Who, if anyone, claims ownership of the retirement issue? Are these individuals empowered to effect meaningful change? How do we measure accountability for achieving plan goals? What alarm bells will ring in time to permit corrective action?
The room is quiet. No one knows what to say. The silence is deafening.
Sadly, current attempts at pension reform are likely to fail because they do not effectively address human behavior. People are motivated by rational self-interest and the promise of recompense for a job well done. This is not a bad thing. To the contrary, it is a cornerstone of a well-functioning market economy. Make it worthwhile and some clever person will figure out how to deliver a better mousetrap at a lower cost with the end result that we all benefit. >>
Click to read the full text of "Do Fiduciaries Need Better Incentives to Make the Retirement System Work?"
What do you think? Do we need a pension version of fantasy football or should organizations hunker down and create the real thing? I vote for the latter! (If your organization already has a pension dream team "for real," take a bow - and tell us more by email.)