Corporate pensions are an unstable, unfair and economically perverse means of paying for retirement.
CNN, January 12th, 2006
NEW YORK (FORTUNE) – It really is over for the corporate pension.
Now that IBM has opted out, telling employees last week that their
pension benefits will be frozen in 2008, it’s hard to see what’s to
stop every last American corporation from preparing its eventual exit
from the pension business. Lots of reasonably healthy companies –
Verizon, NCR, Lockheed Martin and Motorola, to name a few — already
have.
This phenomenon, along with the more dramatic cases of companies going
bankrupt and defaulting on existing pension commitments (think United
Airlines), has gotten tons of press, most of it of the “ain’t it a
shame” variety. But the real shame may be that we ever put so much
faith in such an inherently unstable, unfair and economically perverse
means of providing for retirement.
The corporate pension has been around since the 19th century, but
really came into its own in the United States in the years just after
World War II. General Motors president Charles Wilson was its most
visible champion, creating a company-run pension plan in 1950 over the
initial objections of the United Auto Workers union because he believed
it would improve employee relations.
But there were problems with Wilson’s approach that, while they didn’t
seem like a big deal in 1950, were to loom large decades later. For one
thing, the Wilson way assumed that lifetime jobs with big,
pension-granting corporations were the American norm — which ceased to
be the case decades ago.
