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Pension Funds: Trends in Asset Allocation and Role in Capital Markets, Corporate Governance and Regulatory Policy

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This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
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This article takes as its starting point Berle and Means' claim, in their 1993 book The Modern Corporation and Private Property, that widely dispersed and apathetic shareholders exercise little real control over managers; they concluded that it was no longer realistic to think that managers would run public corporations exclusively in the interests of the shareholders. The author here pursues an examination of the current state of corporate governance in Canada to determine whether shareholder oversight is really as ineffective as Berle and Means postulated. In particular, he addresses the concept of "rational apathy" among retail shareholders, and the impact of the dramatic growth of the institutional portfolio over the past three decades.
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Pension trustees have a fiduciary obligation to act in the best interests of plan members. The impact of recent corporate scandals on capital markets has highlighted the fact that protecting the interests of plan members and beneficiaries extends to pension plans exercising their shareholder rights as a means of fostering good corporate governance and long-term stability and accountability within capital markets. Some jurisdictions have affirmed the role of the pension plan as shareholder through rules governing shareholder participation in corporate governance and statements interpreting the long-standing duties of pension trustees in the context of voting proxies and other shareholder activist practices. This review of the law in Canada, United States and the UK suggests that Canadian pension trustees have an fiduciary obligation as part of prudent and loyal stewardship to oversee the voting of proxies, including establishing policy and monitoring voting in the best interests of plan members. There is also authority to support a similar obligation with respect to corporate engagement with the companies that a pension plan owns, although the law is less precise in articulating the scope of this obligation. The paper reviews the legal and practical barriers in these areas, and provides a fiduciary framework for pension trustees to use as a guide.
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In recent years, the growth of the institutional portfolio (ie., funds managed by mutual funds, insurance companies, banks, trust and loan companies, etc.) has been truly astonishing. In this article, Professor MacIntosh argues that this growth has important implications for the manner in which Canadian capital markets are regulated. In particular, institutional shareholders tend to be better monitors of corporate managers than retail shareholders. Institutional monitoring has been impeded by a number of features of the regulatory landscape. Professor MacIntosh makes a number of recommendations for changes to corporate and securities laws. Contrary to the fears expressed by some, the decline of the retail investor and the rise of the institutional investor should be accompanied by enhanced market liquidity and market efficiency. Regulatory policies premised on assuring the continued market presence of retail investors lack a solid theoretical or empirical footing. Professor MacIntosh also notes that market institutionalization has been and will continue to be associated with growth in the so-called "exempt" market. This will exert a brake on the extent to which regulators can regulate non-exempt market transactions, since higher levels of regulation will only drive issuers and investors into exempt markets or to other locales. Finally, Professor MacIntosh notes that the burgeoning derivatives markets present a challenge for regulators. Properly managed, the purchase of derivative securities can greatly reduce portfolio risk. Improperly managed, however, derivatives can greatly increase risk. Professor MacIntosh argues that most buyers in derivatives markets are institutional, and that where such buyers dominate, a light-handed regulatory approach is indicated.