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The trust is a means of conserving and transferring assets to nominated beneficiaries (Langbein 1997). Regulating the behavior of trustees, the principle of fiduciary duty governs the relationship between trustees and beneficiaries (Thomas and Hudson 2004: s. 1.56). In some jurisdictions, it also enables intermediaries to represent the interests of beneficiaries, providing the former with authority to invest on behalf of the latter. There are a variety of definitions of fiduciary duty ranging from the abstract through to the domain-specific. Atiyah (1995: 255) observed that a fiduciary relationship binds trustees to beneficiaries such that “the person in the fiduciary position is under a duty not to abuse that position, and this duty involves the duty to disclose all material facts.” Stapleton (1996: 13) noted, in relation to company directors and senior executives, being a fiduciary also involves “honesty and loyalty, and a duty of care and skill.” Langbein (2007: 1075) observed the “core fiduciary principle … is the duty of impartiality”; a rule conceived and policed so as to regulate conflicts of interest.
The chapter begins with the historical significance of fiduciary duty (see also Hawley and Williams 2001). This allows us to understand fiduciary duty in relation to functionally efficacious common law norms and conventions. Whereas some might suggest that fiduciary duty evolved as the standard of behavior because of its effectiveness in maximizing social welfare, it is important to acknowledge the idealism about past communities of practice, which is embedded in such claims. This is illustrated by a rereading of two landmark cases that effectively defined the nature and scope of fiduciary duty, relevant to investment management. I suggest that whatever its ideal conception, it has proven insufficient as the golden rule governing the trust institution. Government policies designed to define and regulate the governance of the trust institution represent attempts to solve problems evident in the practice of investment.
We welcome the opportunity to respond to Pete Moore's comments on our paper. In doing so, we address the central issue raised by Moore concerning our use of the term “modern” in our analysis of the origin, structure, and management of Gulf states’ sovereign wealth funds. As it turns out, our use of the term modern is complex and multifaceted; we hope to show that the issue raised by Pete Moore runs in a variety of directions and is not so easily resolved, as he suggests.
We report analysis of voluntary switching from defined benefit (DB) to defined contribution (DC) plans in an environment best characterised as benign. Using a large Australian fund database we identify socio-demographic correlates and the macroeconomic circumstances associated with DB to DC switching. The age of participants is an important correlate of switching behaviour, suggesting a degree of risk tolerance previously not recognised in the literature. It is also noted, however, that this type of switching behaviour may involve secondary behaviour such that uncertainties of DC investment performance are managed by reference to an asset allocation formula that maps to the previous DB investment strategy.
Whereas debate about sovereign wealth funds (SWFs) often focuses upon the global significance of their investment strategies, these institutions are also emblematic of the new global order of financial capitalism. SWFs are a mechanism for states to advance their interests through global financial markets and are a switch point for the translation of resource assets into financial assets in global markets. Yet, realising the promise of SWFs is not easy. The form and functions of these institutions are typically conceived in Western terms, so the necessary infrastructure for their effective performance may not exist in non-Western jurisdictions. Nonetheless, these funds have grown increasingly popular throughout the world. As such, this paper examines the process of SWF adoption in non-Western jurisdictions, and, in particular, SWFs' recent rise in popularity amongst the Gulf States. These countries are particularly interesting as they face a variety of challenges due to institutional contradictions between the norms of Western finance and the inherited traditions of the Gulf. While Gulf SWFs may be limited in their effectiveness, these funds still serve as an important symbol for the region, representing a formal gesture towards ‘modernity’ in the context of nation-states' inherited traditions.
In this article we look at the governance of SWFs from the perspective of the competing political interests embedded in the sponsor—the domestic political claims on funds and the principles and practice of governance used to discipline those interests in favour of a long-term perspective that emphasizes the conservation of wealth and the intergenerational transfer of benefits. Using the case-study of the Australian SWF known as the Future Fund, we argue that SWFs can be used as legal instruments to promote the interests of future generations. In this way, it puts into action the principle of intergenerational equity which has been hereto notoriously difficult to substantively apply in international law. By invoking the intergenerational principle, we argue that the Australian government not only responded to the legal challenges of implementing intergenerational equity but also contributed to its currency as a customary norm.
We have assessed the effect of house-cleaning procedures on changes in airborne dust and bacteria counts and correlated these with respiratory function tests in 14 children with bronchial asthma who were known to have developed attacks at home, and who had positive skin tests to house dust and the house-dust mite.
We have demonstrated that after cleaning procedures a positive and statistically significant correlation exists between the increase in the numbers of small particles, 2 μm. and less in diameter, in the environment, and reduction in mean peak flow. This indicates that particles of this size penetrate the bronchial tree and are the causative factor in the genesis of bronchospasm.
The transition from defined-benefit to defined-contribution occupational-pension plans has placed a premium on the participants' or contributors' decision-making competence. Their attitudes to risk and their responses to available investment options can have far-reaching implications for their retirement income. Behavioural research on risk and uncertainty has raised understanding of the limits of individual decision-making, but the social status and demographic characteristics of plan participants may also affect risk perception and pension choices. By studying a random sample of the British adult population, this paper explores the significance of socio-demographic characteristics for pension-related risk attitudes. It is demonstrated that pension-plan participants do not appear to understand the risks associated with different types of retirement savings and pension plans. The paper also shows that the gender, age and income of plan participants can give rise to distinctive risk propensities, and that marital status and, in particular, whether a spouse also has a pension can also have significant consequences for household risk preferences. These results have implications for those segments of the population that are disadvantaged in the labour market. Employer-provided pensions' education and information programmes may have to be more basic and more closely tailored to the social status of pension plan participants than hitherto assumed or hoped.
An important research programme in the social sciences concerns the theory and practice of individual decision-making under conditions of risk and uncertainty. At the same time, it is apparent that western governments increasingly rely upon individuals to plan and maintain savings programmes to meet their income aspirations: the long-term retirement income of those outside of the welfare state depends a great deal on the competence and consistency of individual decision-making. In this paper, we use a set of problems requiring the same techniques of judgement to test the consistency of trustee decision-making. Respondents were a group of trustees drawn from select UK defined benefit pension plans compared with a larger group of Oxford undergraduates. It was found that many respondents were inconsistent across related problems requiring the application of probabilistic judgement. It is also shown that trustees were more consistent than many undergraduates and it appears that trustee education and professional qualifications can make a positive difference to consistent decision-making. A more challenging test that depends upon understanding the relationship between demographic ageing, immigration, and the financing of pay-as-you-go social security suggests that substantive knowledge and consistency of judgement are crucial components of expertise. Implications are drawn for the trustee institution and the wider debate over the role and significance of individual decision-making with respect to income aspirations.
Government-sponsored inquiries into trustee competence, and legislation regarding the protocols and practice of trustee decision making, have raised questions about the competence of trustees to make investment decisions consistent with the long-term interest of defined benefit pension plan beneficiaries. In this paper, we report the results of an analysis of trustee competence in solving problems relevant to their investment responsibilities. Based upon a set of widely recognized problems drawn from the psychology literature, we assess their discount functions, their willingness to risk their own money and others' money, their appreciation of probability, and their use of evidence to solve problems. For comparison, where appropriate we report the results of the same testing regime applied to a group of Oxford undergraduates. Our goals are fourfold: first, to demonstrate the nature of trustee competence in decision making; second, to demonstrate the range of trustee responses to problems relevant to investment; third, to assess trustees' risk appetites in relation to their own and others' money; and fourth, to draw implications from these results for the governance of trustee boards and their relationships with advisers and service providers. It is shown that trustee competence is surprisingly heterogeneous, and the lack of common approaches to problems relevant to investment practice has significant implications for fund governance.
Responsible for the welfare of beneficiaries, pension funds have many tasks and functions. Consequently, their governance and regulation are issues of public concern with direct bearing on the interests of stakeholders and ultimately the performance of Anglo-American financial markets. Subject to common law expectations regarding proper trustee behaviour, also important are statutory requirements regarding the equitable treatment of beneficiaries and the management of assets and liabilities. At one level, discretion is an essential attribute of the trust institution – trustees act on behalf of others not so well placed to manage their own long-term welfare because of lack of knowledge and/or ability. At another level, pension funds are presumably regulated by a well-defined purpose – the welfare of beneficiaries. In this paper, I look at the internal governance of pension funds emphasizing codes of practice, the rules and procedures for decision making, and trustee competence and expertise. While it is important to observe codes of conduct like those advocated by the OECD, there may be significant problems with any system of governance that relies upon rules and procedures. Inertia rather than innovation may be the net result. These issues are developed with reference to defined benefit and defined contribution schemes (and their variants). Ultimately, pension fund governance reflects, more often than not, its nineteenth-century antecedents rather than the financial imperatives of the twenty-first century.
The authors report, for the first time, the finding by magnetic resonance imaging of a neurofibroma at the craniocervical junction with upper cervical cord and lower brainstem compression causing complete apnea from birth. Subsequent subtotal resection of the neurofibroma resulted in the successful extubation of a previously ventilator-dependent patient. After a two month period of breathing spontaneously, the newborn developed an upper respiratory tract infection and was reintubated. The patient, unable to be weaned off of the respirator, was extubated and expired shortly thereafter, at the age of five months. The authors suggest that in newborns with unexplained apnea, MRI of the craniocervical junction is indicated. Certain patients may be discovered who have less compromised cervicomedullary function and are afflicted by less aggressive forms of neurofibromatosis type 1. These patients may benefit permanently from a surgical decompression.
There is a certain irony in the decline of organized labor and the problematic status of federal labor policy. Although union contracts protect fewer workers from employers' arbitrary decisions, and the National Labor Relations Board appears less reliable in protecting workers' rights as defined by collective bargaining agreements, employers' discretion regarding the treatment of their employees actually seems to have narrowed over the past decade. At the local level, experiments with new forms of labor–management collaboration in nonunion settings have sometimes involved considerable commitment of employers to the welfare of their workers; quasi-union conditions are typical in these settings. In union situations, there have been attempts to broaden workers' discretion in the production process in the hope of increasing labor productivity (witness the partnerships between the United Auto Workers Union and General Motors Corporation in the Saturn Project and the NUMMI plant).
At a broader level, there have been important state-level public policy innovations in nonunion labor–management relations, especially involving limits upon employers' rights of dismissal. Many states have modified the applicability of employment-at-will, the common law doctrine controlling employment relations in nonunion, noncollective bargaining situations. As proscribed in the leading case Payne v. The Western & Atlantic Railroad (1884), employment-at-will provides employers with the right to hire and fire for any reason or no reason, at whatever time they desire. Originally, employment-at-will was simply a practice, legitimated by case law as opposed to statute.