Mira Merme (Switzerland): The story in the Sunday Times that Tate and Lyle is looking to sell its pension-assets and obligations-to a Goldman Sachs controlled pension buy-out specialist should have employees' alarm bells ringing loudly. Analyse the interests here:
- shareholders want to minimise obligations, but are sadly dependent on the cooperation of the employees-the beneficiaries of those obligations
-for the continued good-functioning of Tate and Lyle;
- the Goldman Sachs controlled pension buy-out firm will want to pay out as little as possible while earning high fees on the fund
- the buy-out firm has no relation of dependency on Tate and Lyle employees. This uncoupling means that in effect the pensioners will have no ability to have any say in their own ownership which in effect will cease to be an ownership model and will be a model where the goodwill and generosity of Goldman Sachs will determine their livelihoods.
This "upside we win, downside you lose" cavalier dealing with people’s livelihoods by the financial sector is old news as the credit crunch has already shown how new instruments for “managing risk” have uncoupled assets from liabilities with predictable outcomes as in the current credit crunch. It happened on mortgage securitisation, on Collateralised Debt Obligations and through Special Investment Vehicles. Yet core reform has still not taken place and as we can see by this latest proposal the lesson has not been learned. The financial sector continues to feign surprise when the impacts are so negative on the rest of the population.
Incentives are clearly best aligned by making the beneficiaries of the fund responsible for its management: if you own the fund, you should control its management. This is not for shareholders to sell off into some deep pit of moral hazard. It is for hard working contributors to take responsibility for fund management. How many bonuses and crashes will it take to make that lesson clear?"
