The Geography of Pension Liabilities and Fund Governance in the United States

Abstract

If finance is the engine driving economic and geographic change, then pensions are its primary vehicle. On the one hand, pension-plan assets, which approached US$18 trillion in 2005 for OECD countries, are having global impacts on financial markets. On the other hand, pension-plan liabilities, larger than the assets in nominal terms, are also having dramatic impacts on plan sponsors. If assets are not properly managed, pension liabilities can threaten the financial solvency of plan sponsors. Consequently, owing to the enormous and growing financial and political importance of pension plans, I contend that the procedures governing these institutions are of increasing importance for economic geographers. In this paper the effectiveness of the current governance system is tested through a widely subscribed ‘expert survey’. Then, the relationship between pension-fund governance and economic geography is demonstrated through case study. I conclude that the current governance model remains inadequate. Moreover, poor pension-fund governance, in addition to having an economic cost, is shown to have tangible geographic impacts.