"The corporate brand is not only used to improve competitive
positioning and express company aspirations, it can also be a powerful
tool to motivate employees."
Pension plans' funding status improved again last month as stocks and interest rates continued to climb.
The typical US corporate pension plan in November saw its status inch up to 80.5 percent from 80.3 percent the prior month, according to monthly statistics published by BNY Mellon Asset Management.
Assets for the typical plan declined 0.4 percent. A slight gain of 0.6 percent in the US equity markets was offset by a drop of 4.8 percent in international stocks, according to the BNY Mellon.
Nothing like a stock market rally to alleviate concerns about a pension funding crisis.
The funded status for the typical US corporate pension plan climbed 4.4 percentage points to 80.3 percent, the best status since May 31, 2010, according to BNY Mellon Asset Management's monthly report.
The Pension Benefit Guaranty Corp. (PBGC) has published a proposed regulation which, if adopted, may force companies to increase the funding of their pension plan in excess of legal requirements, warns law firm Wachtell, Lipton, Rosen & Katz.
The regulation impacts Section 4062(e) of ERISA, which requires a company that sponsors a single-employer defined benefit pension plan to notify the PBGC within 60 days if it closes down operations at a facility in any location and, as a result, more than 20 percent of the company's employees participating in the pension plan are fired.
If you live or work in New York City you know how the subway can be both a blessing (when it runs on time) and a curse (when it doesn't) or for reasons that on Wednesday became clear: fare hikes.
If you don't live in New York you can appreciate why the agency responsible for public transit, the Metropolitan Transportation Authority, is having such a difficult time making ends meet. At the top of the list is compensation and benefits costs, which account for two-thirds of the MTA's $12 billion operating budget for 2011.
The MTA says its health care costs are going up about 9 percent annually-which is actually in line with national increases. The challenge for a public agency of course is that it is locked into contracts with its heavily unionized workforce. Making changes is not easy.
The plan the MTA put forward Wednesday was to enter in what it called "net zero" contracts with its unions-contracts in which any raise would be "paid" for by givebacks in productivity, changes in work rules or increased contributions to health care benefits. The unions took exception to this proposal but no one doubts that the compensation structure of government employees needs to come in-line with their private sector counterparts. Andrew Cuomo, the Democratic nominee for governor, has made reforming this imbalance part of his platform.
Debt service aside (and the MTA's debt service totals $1.8 billion this year, growing to $2.5 billion by 2014), the MTA, like so many government entities throughout the country, has long term health care challenges ahead. Its health care retirement obligation totals $1.4 billion growing to $1.7 billion by 2014. While the MTA continues to pay enough into its retiree health care fund to pay for its current retirees' health care, the authority, citing this year's cash-flow problems, will not pay $57 million this year into a fund for future obligations.
The Great Recession has helped bring the issue of government post-retirement obligations to light. As government revenues shrink and obligations grow, taxpayers sense an inherent injustice between their own grim retirement prospects and the assurances given to public sector workers. Subway service cuts and fare hikes are only meaningful if they address the long-term problems rather than enable government to deal with short term crisis.
Cuomo is banking on this public displeasure, as is the MTA. Next year the MTA's contract with its largest union is up for renewal. The transit authority will be able to test whether it has public support for changing the way the state entity does business with unions. Bringing government into the 21st century by reducing health care and other post-retirement obligations will be good for taxpayers and for businesses, including those with heavily unionized workforces.
For years, the prevailing wisdom has held that executive compensation should be tied to a firm's equity. That way, the theory goes, management's goals are aligned with shareholders' interests.
This thinking is fine if you're a shareholder. However, what about bondholders? "If you're compensated only with equity, you're not worried about creditors losing money," points out Alex Edmans, a professor of finance at Wharton who has researched executive compensation. He also is the author of a recent study, "Inside Debt."
The number of large companies offering traditional defined benefit (DB) pension plans continues to decline, as they steadily march toward extinction.
Towers Watson now counts just 17 of the Fortune 100 companies still offering DB plans, down from 20 in 2009 and exactly half the total of five years ago.
Mar 08
2010
Many bank CEOs were paid extra for non performance
When does no bonus still mean a bonus? When pension payments compensate for the absence of cash rewards.
A new report from The Corporate Library, an independent corporate governance research firm, found that 17 CEOs of financial services firm who were not paid bonuses in 2008 received substantial increases in their pension or other retirement benefits. In fact, more than one tenth of CEOs of S&P 500 companies found themselves in this situation in 2008, compared with only one company in 2007.
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