The next seminar of the ISEG Research Seminars will be held on 23 April, between 13.00 and 14.00, in ISEG's Lecture Theatre 3 (Quelhas, 4th Floor).
The event will count with the participation of Annita Florou, from Università Bocconi (Italy), who will present the paper 'Do Employees Value Defined Benefit Pension Plans? Evidence from Employee Satisfaction Ratings', the abstract for which can be found below.
The 2nd Semester Research Seminars will run every week until 4 June and will feature faculty from ISEG, as well as from other Portuguese and international schools. Further information HERE.
Free admission, subject to room capacity.
Abstract
Defined benefit (DB) pension plans are an important part of total employee compensation. However, DB pension plans carry risk as they are subject to minimum funding requirements. We examine the effect of a relaxation in pension funding rules on employee satisfaction by exploiting the adoption of the Moving Ahead for Progress in the 21st Century Act (MAP-21). This exogenous regulatory shock reduces minimum required pension contributions and adversely affects employee retirement security. We find that, employees of DB firms (relative to those of non-DB firms) perceive their firms, overall, and their senior managers, less favorably after MAP-21. We also provide evidence that employees are less satisfied with their senior managers only when the latter do not use the MAP-21 pension funding relief in the interest of the former, such as more investments vs shareholder payouts and CEO compensation. The documented negative MAP-21 effects are concentrated in firms where employee interests are most at risk because the labor force is not covered by a collective bargaining agreement and where DB plans are significantly underfunded. Furthermore, the impact of the regulatory shock is driven primarily by current than former employees. Overall, our results are consistent with adverse changes in pension funding rules negatively affecting employee perceptions of managers and firms.