Modernizing Pension Fund Legal Standards for the Twenty-First Century

Abstract

This paper argues for a modernized interpretation of fiduciary duty that recognizes the symbiotic relationship between the sustainable success of both corporations and pension funds. It describes the impact that pension investment practices have on both the well being of fund participants and the health of the global economy. It also argues that fiduciaries should adopt pension fund governance practices found to be associated with improved investment performance, better align pension fund service provider incentives with the clients' long-term interests, and expand risk identification and management practices to consider systemic and extra-financial factors that may not be reflected on corporate financial statements but have contributed to the current financial crisis. The authors recommend development of pension fund governance best practice guidelines combined with adoption of a 'comply or explain' reporting scheme as a way to improve the ability of pension managers to meet their fiduciary obligations and promote economic stability.

Keywords: Best Practices, Fiduciary Duty, Financial Markets, Fund Governance, Market Reform, Rotman