Outraged by Compensation: Implications for Public Pension Performance
| Autor: | Paulo Manoel, I. J. Alexander Dyck, Adair Morse |
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| Rok vydání: | 2021 |
| Předmět: | |
| Zdroj: | The Review of Financial Studies. 35:2928-2980 |
| ISSN: | 1465-7368 0893-9454 |
| DOI: | 10.1093/rfs/hhab109 |
| Popis: | Public pension boards fear inciting stakeholder outrage if they compensate internal investment managers with market-level salaries. We derive theoretical implications in an agency-portfolio-choice model motivated by inequality aversion. In a global sample, relaxing the effect of outrage on contracting leads to an average annual incremental value-added of $49 million generated through 11 bps in higher excess returns from risky assets, at the cost of $302,429 in additional compensation. Governance reforms that address outrage by reducing political appointees or requiring independent skills-based boards can increase the annual value-added. These findings are orthogonal to costly political distortions from underfunding and pay-to-play schemes. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. |
| Databáze: | OpenAIRE |
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