The Governance of Public Pensions: An Institutional Framework

AuthorDavid S. T. Matkin,Gang Chen,Hina Khalid
Published date01 January 2019
Date01 January 2019
Subject MatterArticles
Administration & Society
2019, Vol. 51(1) 91 –119
© The Author(s) 2016
Article reuse guidelines:
DOI: 10.1177/0095399715621945
The Governance of
Public Pensions: An
Institutional Framework
David S. T. Matkin1, Gang Chen1,
and Hina Khalid1
Prior studies of public pensions emphasize the effect of the political economy
on the performance of pension systems. We argue that this approach
overlooks important institutional features of pension governance and fails
to account for endogenous, indirect, and lagged effects. In this article, we
describe those limitations and develop an institutional framework to explain
the complexity of public pension governance. We identify and discuss critical
environmental conditions, formal institutions, and the causal pathways
between institutions and pension performance. We also use a case study
of the Florida Retirement System to illustrate the explanatory power of the
institutional framework.
public pensions, institutions, governance
In recent years, the governance of public pension systems has become a major
policy issue, and a considerable amount of attention has focused on explaining
the financial performance of those systems (Chaney, Copley, & Stone, 2002;
Coggburn & Kearney, 2010; Dulebohn, 1995; Eaton & Nofsinger, 2004, 2008;
1University at Albany, NY, USA
Corresponding Author:
Gang Chen, University at Albany, 135 Western Ave., Milne 319, Albany, NY 12203, USA.
621945AASXXX10.1177/0095399715621945Administration & SocietyMatkin et al
92 Administration & Society 51(1)
Johnson, 1997; Kelley, 2014; Marks, Raman, & Wilson, 1988; Peng, 2004;
Schneider, 2005; Schneider & Damanpour, 2002; Sneed & Sneed, 1997;
St. Clair, 2013). To date, most of the research has attempted to understand the
governance of public pensions by studying the effect of the political econo-
mies of pension systems on their financial performance. Unfortunately, that
approach too often overlooks the importance of complex formal institutional
frameworks that are central to the performance of public pensions (i.e., orga-
nization structures, policies, rules, and procedures; March & Olsen, 1989;
Ostrom, 1999; Scott, 1995).
The tendency of the public pension literature to deemphasize the impor-
tance of institutions is not likely to surprise organizational researchers. In one
of the most comprehensive studies of government operations, James Q.
Wilson (1989) states, “Only two groups of people deny that organization
matters: economists and everybody else” (p. 23). Wilson observed that
researchers typically expect organizational outputs to reflect the interests of
their principals (such as elected officials, executive managers, and powerful
stakeholders) and place little importance on the role of the organizations
themselves. In the public pension literature, this perspective is demonstrated
by modeling the financial performance of public pensions as a function of
governments’ political preferences (e.g., political ideology, the partisan com-
position of elected offices, median-voter proxies, and the influence of special
interest groups) and the constraints and incentives on those preferences (e.g.,
fiscal concerns and professional management).
The organizational literature, in contrast, suggests that organizational out-
puts are greatly affected by institutions, especially when firms are exposed to
disruptive external environments. Thompson (1967) describes how organiza-
tions protect their “technical core” from disturbances in their external envi-
ronment by developing institutions to mediate between environmental
pressures and firms’ central purposes. Mintzberg (1979) finds that organiza-
tional “technostructures,” which include their financial management systems,
develop rules, procedures, and communication channels to promote organi-
zational stability and to facilitate core technologies. The institutional per-
spective does not, as such, reject the influence of organizational principals or
of the external environment but, rather, contends that institutional conditions
have substantive mediating and moderating effects.
The purpose of this article is to improve our understanding of public pen-
sions by developing an institutional framework of their governance. Previous
studies have provided minimal attention to the institutional characteristics of
public pensions. Some research has focused on the relationship between bud-
getary institutions and political preferences (Chaney et al., 2002; St. Clair,
2013; Thom, 2013). Other studies have narrowly focused on one or two

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT