Pension Funds in a Highly Politicised Environment: The Case of the Philippines

Abstract

This article seeks to contribute to greater understanding of the challenges faced by pension funds in developing countries. This paper reviews the investment decisions and strategies of two government owned pension funds in a highly politicized environment. The Government Service Insurance System (GSIS) and the Social Security System (SSS) are both government owned pension funds located in the Philippines. Interviews were conducted in 2007 with representatives from both pension funds, and other public and private sector interviewees as part of a broader research into the turbulent corporate governance landscape of the country. A review of politicisation and presidential appointments provide the context in which the two pension funds operate in the country. Being government institutions, these two funds have experienced the delicate balancing act of pursuing organizational objectives concurrently with political wishes – more often than not, at the expense of the former to appease the latter. One of the ongoing debates in Western corporate governance is the exercise of influence and activism by institutional investors. In this context, the institutional investor influence of GSIS and SSS are examined. The actions of the pension funds in an episode involving former Philippine President Joseph Estrada and a bank merger provide an insight into how institutional investor activism is exercised and conducted in a non-Anglo American corporate governance environment, and a developing economy with a weak bureaucratic state.

Keywords: politicisation, Philippines, pension funds, developing economies