The Governance of Pension Funds
Occupational pension funds in most western countries are either directly managed or indirectly influenced by the labor market parties. In the spirit of labor market tradition, both employers and employees are represented on the board of the pension fund, and both sides typically nominate the leader of their organization to the board. Thus, employers allocate their designated seats to experienced business professionals, whereas unions typically nominate their leaders to the board. In the public sector, where the central or local administration is the employer, local politicians are nominated from the employer side. As a consequence the boards of pension funds are comprised by a mix of individuals with little experience or no formal education in making investment decisions.