The Governance of Occupational Pension Funds and the Politico-Economic Implications: The Case of Austria

Abstract

This paper analyses the efficacy of the governance structure of occupational pension funds (Pensionskassen - PKs) in Austria. Based on the results of the analysis, it further investigates the politico-economic implications for the political and legislative process regarding recent changes to the relevant Act (Pensionskassengesetz - PKG). The first section explains the exclusion of the beneficiaries' interests from the institutional interest of the PKs' association, i.e. the distribution of power, by the underlying governance structure of PKs. This section focuses on the structural conflict of interest PKs face, namely between their beneficiaries and their shareholders (almost exclusively large Austrian banks and insurance companies). The institutional interests of PKs are determined by the governance structure at the micro and meso levels and the interests of the stakeholders, in particular those of the shareholders, while the governance structure is treated as given. The analysis is based on the economic notion of governance in the tradition of the New Institutional Economics. The second section focuses on the empirical investigation of the politico-economic impact of the findings in the first section. It analyses the role of the PKs and in particular the PK association (Fachverband der Pensionskassen) in the political process in a case study. It argues that the repercussions of the governance structure at the micro and meso levels on the political level can result in a vicious circle for beneficiaries and that the political risks associated with long-term guarantees for beneficiaries of occupational pension funds are substantial and aggravated by the governance structure at the micro and meso level. The politico-economic investigation rests on an actor-centred institutionalism.

Keywords: Governance, pensions funds

JEL Classification: D78, G23, G38, K0