The role of CEOs in the sustainability of defined benefit pension plans
By Joanne Horton, Paraskevi Vicky Kiosse, Maria Koumenta & Evisa Mitrou
The future of defined benefit (DB) pensions is a hotly debated topic in reward management. Drawing on agency and managerial power theories, the conditions under which CEOs can affect their sustainability have been examined. We show that when the CEO is a member of the same DB plan as their employees or when the CEO is both a member and a trustee of the plan, this affects the agency and power dynamics increasing the likelihood of these plans being retained. To address endogeneity concerns, we mimic randomisation using propensity score matching and the results continue to hold. Using the introduction of pension tax penalties as an exogenous shock on CEO self-interest, we find that it affects the propensity of DB plan closures. The study highlights the key role that CEO incentives play on pension–provision decisions and indicates how HR practitioners/regulators can harness CEO self-interest to safeguard the sustainability of DB pension plans.
Source Wiley
