Outraged by Compensation: Implications for Public Pension Performance

• 成果类型: Article
• 署名作者: Dyck, Alexander; Manoel, Paulo; Morse, Adair
• 署名单位: University of Toronto; University of Kentucky; University of California System; University of California Berkeley; United States Department of the Treasury
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhab109
• 发表日期: 2022
• 页码: 2928
• 关键词: asset allocation; INVESTMENT; equity

摘要

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.