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<p>We examine whether the discretionary governance practices of pension board of trustees have a significant impact on the returns of the plan’s invested assets. We construct a unique database of board practices by analyzing meeting minutes of public plan board of trustees. Employing Principal Component Analysis, we formulate a pension plan <i>Board Engagement Index</i> to capture board dynamics beyond mere board size and composition. Our results demonstrate that pension funds characterized by a higher level of board engagement – reflected in higher index scores - exhibit enhanced fund performance. Our results are robust to endogeneity concerns. On an annual basis, one standard deviation increase in the engagement index corresponds to a 3.9% increase in benchmark-adjusted returns, everything else constant. Our findings underscore the substantial impact that board engagement can exert on a plan’s financial performance.</p>

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Does the Board Engagement of Public Pension Plans Matter?

  • 期刊论文

  • 发表日期：

    2025年1月7日

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  • Matteo P. Arena,
  • Christopher K. Merker,
  • Sarah W. Peck,
  • Bin Wang

摘要

We examine whether the discretionary governance practices of pension board of trustees have a significant impact on the returns of the plan’s invested assets. We construct a unique database of board practices by analyzing meeting minutes of public plan board of trustees. Employing Principal Component Analysis, we formulate a pension plan Board Engagement Index to capture board dynamics beyond mere board size and composition. Our results demonstrate that pension funds characterized by a higher level of board engagement – reflected in higher index scores - exhibit enhanced fund performance. Our results are robust to endogeneity concerns. On an annual basis, one standard deviation increase in the engagement index corresponds to a 3.9% increase in benchmark-adjusted returns, everything else constant. Our findings underscore the substantial impact that board engagement can exert on a plan’s financial performance.