Abstract
ABSTRACTThe 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.
Highlights
For many decades, pension plans have been recognised as an important pillar within the HR rewards literature
The coefficient on CEO_MainDB is À 1.236 (p < 0.001) in column (1) and À 0.270 (p < 0.1) in column (3), indicating the hazard of full closure in the period is 71% (24%) lower if the chief executive officer (CEO) is a member of the defined benefit (DB) plan [the hazard ratio is equal to exp. (À 1.236) 1⁄4 0.291]
In the context of debates about the future of pension provision, we examine the conditions under which CEOs can affect the sustainability of DB pension plans
Summary
Pension plans have been recognised as an important pillar within the HR rewards literature. Within the employment relations literature and in the context of unionised workplaces, research on the presence of employee representatives on pension boards has produced mixed results in their ability to prevent scheme closures (Sayce, Weststar, & Verma, 2014; Verma & Weststar, 2011) Absent within these literatures is a consideration of how the agency power that top executives can exercise in pension plan closure decisions can impact a firm's propensity to continue supplying DB plans. Given the central role that pension provision plays within rewards management and the current public policy direction toward avoiding further scheme closures, our findings make an important empirical contribution to the HR community, trade unions and policy‐makers as they endeavour to put in place incentive structures to increase the likelihood of the remaining DB plans to survive
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