Bad Company. The Indirect Effect of Bargaining Power in the Pension Plan Industry

Posted: 16 Sep 2016

See all articles by Isabel Abinzano

Isabel Abinzano

Universidad Pública de Navarra

Luis Muga

Universidad Publica de Navarra; INARBE

Rafael Santamaria

Public University of Navarre

Date Written: September 14, 2016

Abstract

This paper analyzes the role played by pension plan governance structure in determining the power of the investor/decision maker to bargain with the management firm and how it impacts on plan fees and plan performance. The results show that fees decrease significantly and before- and after-fee performance improves when pension plan governance structures permit full alignment of interests and allow greater capacity for the decision-makers to monitor and discipline the managers. It is also observed that companies managing funds with both types of plan, tend to take advantage of the different levels of monitoring capacity and bargaining power held by investors in each type of plan and subsidize employee plans at the cost of individual plans. These results suggest that the adoption of formulas to guarantee majority board representation for investors would be preferable to focusing exclusively on stipulating a minimum proportion of independent directors.

Keywords: Pension Plan Governance; Bargaining Power; Fees; Performance

JEL Classification: G23, G30

Suggested Citation

Abinzano, Isabel and Muga, Luis and Santamaria, Rafael, Bad Company. The Indirect Effect of Bargaining Power in the Pension Plan Industry (September 14, 2016). Available at SSRN: https://ssrn.com/abstract=2838891 or http://dx.doi.org/10.2139/ssrn.2838891

Isabel Abinzano

Universidad Pública de Navarra ( email )

Campus Arrosadía
Pamplona, Navarra 31006
Spain

Luis Muga

Universidad Publica de Navarra ( email )

Campus de Arrosadia 31006 Pamplona
Spain

INARBE ( email )

Rafael Santamaria (Contact Author)

Public University of Navarre ( email )

Campus de Arrosadia s/n
Pamplona, Navarra 31008
Spain

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