Chapter 19. Defined Contribution Plan Governance

In contrast to management, which is about running a business, governance is about seeing that it is run well. So you would judge management by results and governance by process.[163] It is self-evident that a better process is more likely to lead to better results. More formally, governance is the process of making, implementing, and evaluating decisions related to an area of responsibility. It is defined by the decision structure: What are the decisions that have to be made, who has input, who makes each decision, who implements it, who monitors it in action, who evaluates it.

Governance principles have been around, in some form, for as long as decisions have been delegated. There is no need to reinvent them for defined contribution (DC) plans; they have to be adapted to the DC context and applied. Over the course of the authors' careers we have observed a dramatic change in the scope of the governance principles applied to DC and the consistency of their application. But there is room for improvement, not so much in the principles themselves as in their implementation.

In this chapter, we draw together governance threads from other parts of the book. We also use the story of how American DC plans have evolved, to illustrate the principles. Our discussion focuses on investment aspects rather than record-keeping aspects.


The purpose of DC plan governance is to provide for the oversight, ...

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