The resignation under duress of the CEO of Wells Fargo, after being pummeled in a Congressional hearing, raises a fundamental question: how can corporate boards hold management accountable for performance problems? One trendy answer from several governance mavens — limit the terms of independent directors so they do not become unduly deferential to the CEO.
The most typical limit on independent directors is mandatory retirement at age 72. This is the tenure limit for the Wells Fargo board. It is a significant limit because most directors do not join large company boards until age 60.
It’s true for everyone: despite our best intentions, we often fail to accomplish what we set out to do. When it comes to retirement investing, millions of Americans do not meet their own declared saving goals for retirement.
As a result, almost one-third of the U.S. population has no retirement savings at all,while many others will fall well short of what they will need for their Golden Years.
A solution can be found in the field of behavioral economics, which suggests ways tohelp Americans start saving. It seems that saving is a lot like dieting — small changes can help you reach your goal.
These studies show that when an automatic savings plan is introduced with an opt-out, 60% to 70% of employees remain in the plan. This may seem like a technical nuance, but there is a big difference between opting in by completing an application versus choosing not to opt out.
A plan designed to take advantage of this behavior is called an automatic IRA. In the same way that many people fail to start saving, those placed in an automatic IRA simply fail to stop saving by withdrawing from the plan. Automatic IRAs help people build their savings using the power of inertia.
Underfunded/unfunded retiree healthcare is a topic that gets little attention in the finance media. All the attention has been paid to pension funds, but retiree healthcare is in worse shape. For example, if a pension fund is only 70 percent funded, it is considered extremely underfunded. And yet retiree healthcare plans are on average only four percent funded.
MIT Sloan Professor of Management, Emerita Lotte Bailyn
How do today’s Baby Boomers—many of whom are still healthy and active—view their retirement? The traditional image of these so-called Golden Years involves leisure and freedom: mornings on the golf course, afternoons puttering in the garden, perhaps with some globetrotting and grandchildren thrown in for good measure. (Of course this option is only open to those who through pension plans or savings have the means for it.
In recent years, a second image of retirement, known as “aging in work,” has emerged. This model, borne in response to the economic need to protect Social Security and retain experienced workers’ knowledge, keeps retirement-age employees working in part-time or contract positions. It’s sold as win-win: Companies and the country benefit financially, but employees benefit, too, because it keeps their brains active and their social networks strong. The assumption is that continuing to work, though under better, more flexible conditions, is what makes people happy. The mainstream media back the model. Why Working Longer Is Good For Your Health and Get back to work! Working past “retirement age” is beneficial are just a few recent headlines.
On October 29, China adopted a policy of two children per family, instead of one. This change is, in large part, intended to mitigate the adverse demographic trend plaguing China’s social security system: the rapidly declining ratio of active to retired workers. The ratio is falling from over 6:1 in 2000 to under 2:1 in 2050.
However, the new two-child policy is not likely to have a big impact on the worker-retiree ratio, so China’s retirement system will remain under stress. To sustain social security, China needs to implement other reforms — moving from a local to a national system and expanding the permissible investments for Chinese pensions.
The one-child policy always had exceptions, such as for rural and ethnic communities. These exceptions were broadened in 2013 to cover couples where both were only children. Yet the birth rate did not take off.