Corporate Retirement Security: Social and Ethical Issues (Leeds School Series on Business and Society)

216 Pages·2007·1.041 MB·English

by  Robert W. Kolb

Corporate Retirement Security
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Corporate Retirement
Security
Social and Ethical Issues
Edited by
Robert W. Kolb
© 2007 by Blackwell Publishing Ltd
BLACKWELL PUBLISHING
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First published 2007 by Blackwell Publishing Ltd
1 2007
Library of Congress Cataloging-in-Publication Data
Corporate retirement security: social and ethical issues / edited by Robert W. Kolb.
p. cm. — (The Leeds School series on business and society)
Includes bibliographical references and index.
ISBN 978-1-4051-5048-4 (hardcover : alk. paper) 1. Pension trusts—United States.
2. Social responsibility of business—United Stages. I. Kolb, Robert W., 1949–
HD7105.45.U6C67 2007
331.25’.20973—dc22
2007000201
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Contents
Preface vii
List of Contributors viii
Introduction ix
Part I: Ethical Issues in Pension Plan Structure 1
1. Pension Plan Design: An Examination of Corporate Social
Responsibility 3
Joanne H. Gavin and Ken Sloan
2. The Pension That Isn’t: The Defined-Contribution
Retirement Plan 19
Barry Bennett
3. Corporate Retirement Security: A Bankrupt Oxymoron 33
Patricia H. Werhane
4. Trust, Portability, and Sustenance in Pension Plans 45
Robbin Derry
Part II: Pension Plan Changes 53
5. Markets, Promises, and Responsibility: Reconsidering
Pensions and Ethics 55
Eugene Heath
6. Not How Much But How: The Ethics of Cash Balance Pension
Conversions 77
Michael E. Johnson-Cramer and Robert A. Phillips
7. Ethics of Corporate Retirement Program Changes 95
Duane Windsor
8. Reflections on Markets, Retirement, and Corporate
Responsibility 111
Jeffery Smith
Part III: Investing Pension Plan Funds 119
9. Pensions and the Companies They Own: New Fiduciary Duties in a
Changing Social Environment 121
Peter D. Kinder
vi Contents
10. Pension Funds and Socially Responsible Investing: More Risky
Than Responsible Business 151
Sarah Fuhrmann
11. Why Social Investing Threatens Public Employee
Pension Funds 174
Jon Entine
Index 191
Preface
In the spring of 2005 a group of scholars gathered in Boulder, Colorado to
address the topic of corporate retirement security – one aspect of the entire
system of providing retirement income in the United States. By focusing on
retirement funds provided under the aegis of private employers, we hoped to
make a meaningful contribution to the continuing public policy debate con-
cerning the broader question of how workers (and non-workers and unpaid
workers) in the United States are to secure sufficient funds to make possible a
retirement income that is in some essential way consistent with their expecta-
tions and their lifetime of achievements.
Contributors came from many backgrounds, including business schol-
ars and business ethicists, philosophers, attorneys, and business people who
provide services to corporations struggling with the problems of managing
their retirement programs in an era of rapid change. These diverse perspec-
tives, drawn from representatives of many disciplines and walks of life, led to a
wide-ranging exchange of ideas and the opportunity to learn from those who
have a different outlook. The contributions to this volume reflect our society’s
widespread disagreement on the most fundamental aspects of the employment
relationship in general, as well as the proper design of corporate retirement
programs and the allocation of responsibility for retirement among individu-
als, their employers, and other entities, such as the federal government.
The symposium was directed by the Center for Business and Society at the
Leeds School of Business at the University of Colorado under the leadership of
Deans Steven Manaster and Stephen Lawrence. Major funding to support the
symposium was drawn from the Leeds School, the Boulder County Business
Report, and through the generosity of George and Judy Writer and their fam-
ily. Vincent Snowbarger, Deputy Executive Director for Legislative Affairs of
the Pension Benefit Guaranty Corporation, attended the entire conference and
made a public address to an audience of scholars, students, and members of
the Boulder community.
Robert W. Kolb
Boulder, Colorado, USA
List of Contributors
Barry Bennett
Bonneville Power Administration, Portland, OR, USA
Robbin Derry
Northwestern University, Ivanston, IL, USA
Jon Entine
Miami University, Oxford, OH, USA
Sarah Fuhrmann
v-Fluence Interactive Public Relations, San Diego, CA, USA
Joanne H. Gavin
Marist College, School of Management, Poughkeepsie, NY, USA
Eugene Heath
State University of New York at New Paltz, New Paltz, NY, USA
Michael E. Johnson-Cramer
Bucknell University, Lewisburg, PA 17837, USA
Peter D. Kinder
KLD Research & Analytics, Inc.
Robert W. Kolb
Mountain Ridge Place, Boulder, CO, USA
Robert A. Phillips
University of Richmond, School of Business Administration, San Diego, CA,
USA
Ken Sloan
Marist College, School of Management, Poughkeepsie, NY, USA
Jeffery Smith
University of Redlands School of Business, Redlands, CA, USA
Patricia H. Werhane
DePaul University, Chicago, IL; University of Virginia, Charlottesville, VA, USA
Duane Windsor
Rice University, Houston, TX, USA
Introduction
Robert W. Kolb
In the United States, individuals draw funds for their retirement from many
sources beyond savings made at their own initiative, including entitlements from
the federal government, transfer payments from a variety of sources, and funds
from their employers, whether public or private. As with so many institutions,
these various providers of retirement funds reflect a long history during which
the sources of retirement savings have evolved. In the 19th century, very few
individuals could rely on government payments or employer-provided pen-
sions. Instead, funds for retirement came from the savings of individuals, or in
more cases, from support by younger family members.
Starting in the latter part of the 19th century and continuing to evolve well
into the 20th century, more and more employers sought to attract and retain
employees by making promises, sometimes quite generous promises, of lifelong
pension payments upon retirement. Much of this implicit, or even explicit, con-
tract was predicated upon the assumption that an employee would complete a
full career with a single employer, and that the employer was sufficiently stable
and financially viable to make a credible long-term promise of those pension
payments. The first half of the 20th century witnessed the development of vari-
ous government programs and entitlements that attempted to provide a floor
of retirement income for all citizens. In the last third of the 20th century, and
continuing into the 21st century, the nature of work in U.S. society has con-
tinued to change in ways that vitiate previous implicit employment contracts
and prior understandings regarding retirement arrangements and pension pay-
ments. Today’s young employee can anticipate numerous changes in employers,
or even careers, over a lifetime of work. Further, the “creative destruction” of
capitalism seems to accelerate, with firms arising, flourishing, and passing out
of existence with a rapidity that was not contemplated at the mid-20th century.
All of these changes have caused, and promise to continue to cause, vast changes
in both the structure and levels of retirement income for America’s workers.
Corporate Retirement Security in the United States
The concept of corporate retirement security refers most directly to employer-
sponsored pensions and other retirement income of workers retiring from
careers in private sector U.S. businesses. These employer-sponsored plans
come in two basic types: defined-benefit and defined-contribution plans.