Page 81 - SUSTAINABILITY ISSUES & COVID-19

Stewardship Theory
Donaldson & Davis (1991) argues that shareholder interests are maximized by joint responsibility for the roles of the
director and CEO. This theory explains that the executive manager is not ambitious about individual achievement but
wants to do a good job, to be a good steward for the company. Davis et al. (1997) argue that among other factors,
managers who identify their organization and have a high commitment to organizational values are more likely to
serve organizational goals.

The pension fund is a legal entity entrusted by its participants to manage their funds. The pension fund manager has
the responsibility to manage the pension fund to provide sustainable welfare to the participants. Therefore, in carrying
out their work, the manager is not only motivated by material and money but behaves in the common interest and
avoids conflicts of interest with other parties to achieve the goals or objectives of the pension fund.

Good Corporate Governance
Prudence in managing pension funds is one of the pillars of governance that affects the performance of the pension
fund program. The Organization for Economic Cooperation and Development (OECD) explains that corporate
governance involves a series of relationships between company management, the board, shareholders, and other
stakeholders. The corporate governance contains six principles, namely guaranteeing the basic framework of effective
governance, protection, and facilitation of the rights of shareholders, equal treatment of all shareholders including
minority and foreign shareholders; recognition of stakeholder rights; timely and accurate disclosure of information; as
well as the existence of effective management monitoring by the board of directors to the company and shareholders
(OECD, 2015). The National Committee for Governance Policy (KNKG) explains corporate governance as a process and
structure used by corporate organs to provide added value to the company in a sustainable manner in the long term
for shareholders while still paying attention to the interests of other stakeholders, based on applicable laws and norms
(KNKG, 2008).

Asset Allocation
The asset allocation process consists of three main elements, which are planning, implementation, and feedback
according to the Chartered Financial Analyst (Bodie et al., 2014). The asset allocation planning stage shows several
stages, namely identifying and determining the objectives and limitations of investors; formulating investment policies,
considering capital market expectations, and formulating strategic asset allocations. The investor’s objective is focused
on the best combination of risk and return from the investor’s side (Bodie et al., 2014).

The first step that pension funds take in making asset allocation is to determine broad asset classes that will be invested
in. The asset allocation strategy used to compile a diversified portfolio is divided into two, namely strategic and tactical
asset allocation. Strategic asset allocation involves weighting for different asset classes (money, bonds, and stocks) and
doing rebalancing on regular basis with consideration of the overall situation of the investor and financial conditions
that change over time. Alestalo & Puttonen (2006) explain that strategic asset allocation decisions greatly affect pension
fund performance. Furthermore, tactical asset allocation which is also referred to as “market timing” is carried out by
overweight or underweight various asset classes at a certain time in order to increase the rate of return on investment.

Cardona (1998) describes the factors that investors should pay attention to before making asset allocation decisions.
First, what are the goals of investors in investing. Second, to achieve these investment objectives, do investors have
sufficient time to withstand a prolonged market decline. Third, risk and reward. Fourth, the financial condition, in this
case, the total net worth of the invested investor, that is, the greater the total net worth to be invested, the investor
certainly wants to diversify.

80 International Conference on Sustainability
(5 Sustainability Practitioner Conference)
Th