Pension Schemes, Sustainable Investing and the Promise and Challenge of Governance Innovations

The thesis is motivated by a contemporary paradox: beneficiaries’ occupational pension contributions, as invested through their pension schemes, form significant financial flows. But almost all beneficiaries are disengaged from the governance decisions determining these flows. Moreover, if beneficiaries are dissatisfied with the performance of their pension scheme, opportunities to exit are absent or limited in pensions systems with a (quasi-)mandatory second pillar, where the market impulse is stifled. This thesis offers a new perspective on how to understand and respond to this paradox. Drawing upon Hirschman’s Exit, Voice and Loyalty (1970), I argue that in the face of either absent or limited opportunities for exit, governance innovations which enhance beneficiary voice should be considered. In particular, voice has the potential to bring benefits to pension scheme governance which, given the recent turn to sustainable investing, addresses the complexity of governing schemes in the best interests of beneficiaries.

Taking Hirschman’s suggestion of voice as an alternative to exit seriously, I draw upon influential democratic (deliberative and participatory democracy) and strategic management (stakeholder) perspectives which theorise on engaging with publics for decision-making. I distil their normative concerns into an integrative conceptual framework, that includes seven qualities of voice: (a) inclusive engagement; (b) deliberative communication; (c) informed engagement; (d) transparency; (e) influence; (f) articulating value; and (g) feasibility.

The idea of enhanced forms of voice is likely to be challenged as infeasible in pension schemes and on matters of sustainable investing. I address this critique by presenting a qualitative, interpretative analysis of two governance innovations that engage beneficiaries: the Member Council and the Delegate Assembly. Both models are integrated into sustainability-focused pension organisations situated in mature, multi-pillar pensions systems, where beneficiaries have no or restricted opportunities to exit. The empirical findings explore how the practice of these models shape the realisation of the qualities of voice.

Although I take the normative ambitions of voice seriously, I do not take a polemical stance that ignores the structural and contextual challenges to realising its promise. Instead, I draw out the locally specific conditions in each case study that enhance or encroach upon the realisation of voice. By drawing connections with the literature on citizen engagement in public governance, I examine the promise and challenge of institutionalised voice for pension schemes. I argue that while there are significant and pervasive obstacles, the conditions of pension schemes also provide an institutional setting conducive to voice. Moving forward, I suggest ways in which voice in pension scheme governance might be further enhanced and enriched.