Some companies, notably IBM, have recently chosen to shift their pension investment risks to employees by converting their DB plans to defined contribution, or DC, plans. For companies contemplating such a shift, Merton argues that DC plans without some corporate oversight or responsibility for results are not a long-term solution. In his words, "If lots of people do not receive in the future what they were promised, companies may find themselves making good, either voluntarily or otherwise, on what prove to be the implicit obligations associated with being a long-lived institution."
This speech is published in the current issue of the Journal of Applied Corporate Finance. Media wishing to receive a PDF please contact JournalNews@bos.blackwellpublishing.net
Journal of Applied Corporate Finance is a Morgan Stanley Publication. Published since 1988 and reaching a broad audience of senior corporate policy makers, this highly regarded quarterly brings together academic thinkers and financial practitioners to address topics driving corporate value. The Journal covers a range of topics, including risk management, corporate strategy, corporate governance and capital structure.
Robert C. Merton was awarded the 1997 Nobel Prize in Economics. Dr. Merton is a John and Natty McArthur University professor at the Harvard Business School.
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Last reviewed: By John M. Grohol, Psy.D. on 21 Feb 2009
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