Friday, May 29, 2015
Putting the Power Back in Pensions
The problem with pensions is that when they go South there are few win-win situations, and reform comes with a significant cost; especially to those of older age. The cost either falls on the states, on employees, or on the national economy. As the risk of multiple pension implosion rises at a time when national debt is high, the Great Recession is coming to a close, and international strife is present it becomes necessary to tackle this problem succinctly.
It is difficult to truly wrap one's arms around this problem unless a thorough investigation is conducted to understand not only the underlining mechanics that led to the decisions which created the cash shortfall. Only through understanding, official integrity, and strategic implementation can new approaches to retirement planning be implemented for the benefit of its most important beneficiaries.
Honest conversations are difficult because they run into the very fabric of how we view our economic and political system. There is a high level of potential fallout from questionable decision-making that is likely to be embarrassing and minimized by internal social networks. Companies could potentially close their doors and thousands of people may march on the street in complaint of the swooshing away of their concerns.
Accountability can be difficult when an entire region has a stake in how the system operates. Whether one is a judge or a janitor the money from these funds fuels the economic and political engines of the area making it challenging to find buy-in for reform; the problem turns into a crisis before action is taken. Political parties are so heavily invested in the outcome and their interpretation of events that few can rise above the rhetoric to make decisions in the best interest of all stakeholders.
Busted pension systems does allow academics an opportunity to research how and why these pension funds go bankrupt to ensure that sound management principles are developed for future decision-making. With the support of the Justice Department, and those who support the greater good, poor decisions can be analyzed, and new "red flags" created. Academics can use this information to develop stronger models and test those models to help teach students how to handle responsibilities throughout their careers.
A thorough investigation requires the analysis of tens of thousands of documents, interviews, and comparing successful pensions with the pensions in question. Chasing specific rabbit holes to understand individual transactions is beneficial but so is taking a meta-data approach that allows research the ability to see where all these rabbit holes were dug can reveal important information. It is a mammoth undertaking but when you consider the billions of dollars lost, and the growing concern of pension problems in other areas, it is a small drop in the bucket.
Putting the power back in pension funds means freeing them from the many interested parties that seek personal gain and ensuring a proper team of diversified and qualified professionals are in place to create checks-and-balances on official's decisions. That diversified team should be made of people that represent different political, ethnic/racial, and industry backgrounds. Their ability to see the problem from multiple vantage points makes all the difference in the success of new strategic choices.
Pension reform is a painful process of changing minds about responsibility and how to handle that responsibility. It doesn't matter if a person is a recipient of pension monies, works for the pension system, is a political candidate, a business that receives investments, or a taxpayer that has to bail out the system because all have a vested interested in protecting our futures. Reform is in the best interest of everyone!
Pension change relies on leadership that takes the high road even when no one else is listening and there is little support for change. It is about making decisions that others are afraid to make and working toward something more idea. A leader's greatest asset is to stand back from the rhetoric, assess the situation, and create a group of collaborators that are connected by the same end goals. Putting power into pensions is about solving problems before they become unmanageable and finding new ways paths for the future.