Supporters of defined benefit put up a spirited defence of their system against the advocates of defined contribution during a debate at the Asinta network’s annual conference in Rome last month.

Roy Cecil, director of human resources Europe, Beckman Instruments, accused proponents of DC of cowardice and gross violations of human rights”, adding “unless we satisfy all three groups of stakeholder - customer, shareholder and employee - we will not continue in business”.

His opponents in the debate were Barbara Quilty, accounts leader of Monsanto Business Services in the US, and Colin Monks, vice-president at Citibank UK, who oversaw the bank’s change to a DC plan in 1991.

On the DB team Cecil was partnered by Manuel Martinez Dominguez, president of Laboratios Columbia, a Mexican pharmaceutical company. Dominguez opened the debate by saying that a company’s employees were its most important asset and that a DB plan underlined its commitment to them.

In terms of internal company administration he said: “It is much easier for us to manage a global mandate than to manage individual accounts,” while professing faith in actuarial projections. He also asserted that DB gave the company more flexibility over investment decisions.

Monks discussed the success of Citibank’s own transition. He raised the issue of costs, which in 1991 had risen by 15% in five years. The UK Labour Party looked like increasing them by a further 30% if elected, he said. “The bank did not like the uncertainty.” At Citibank, the average employee age was 33, with an average service of five to six years, also making DC more appealing. “We also wanted to introduce flexible benefits and a DC plan was seen as essential.

“Education is the most important part of a DC plan,” he concluded. “We need to help employees stand on their own and to make their own investment decisions.”

Quilty also stressed the responsibility to educate: Monsanto conducted 400 meetings with its 77,000 em-ployees about its change to DC. She underlined the benefits of DC for wo-men who took a career break to have children or for those who changed jobs.

But it was Cecil who made the most vigorous defence of the DB system. “The essential issue here is added value. If an employer guarantees value during employment what is an employee to make of the failure to guarantee the value of compensation afterwards,” he said.

Denying charges of paternalism, he asked: “How many of us believe that the majority of our employees have the expertise, the time or the funds to get advice? For companies that select the managers to not be prepared to support this selection is cowardice.” He also questioned the advice of actuaries with their “ultra-conservative backgrounds”.

With Cecil’s rhetorical flourish, the DB side may well have won the debate but it remains to be seen if his arguments are as telling in boardrooms across Europe.

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