Corporate governance weaknesses may be leaving the Pension Benefit Guaranty Corp. vulnerable to mismanagement.

Barbara Bovbjerg, an analyst with the U.S. Government Accountability Office, suggests that possibility in a review of governance structure at the PBGC, the government corporation that insures U.S. defined benefit pension plans.

The PBGC is a unit of the U.S. Department of Labor that is governed by a 3-member board. The directors are the secretaries of Labor, Commerce and the Treasury.

In the past, the board has sometimes gone for years without holding formal meetings, Bovbjerg writes.

The board now meets twice a year, but the meetings are short, and the board members’ “board representatives” – officials at the assistant secretary level or higher who act as the cabinet secretaries’ liaisons to the PBGC–can provide little documentation of what happens during their meetings, Bovbjerg writes.

The cabinet secretaries each appoint one staff person to help the board representatives, but the board representatives and the staff people all have other responsibilities, Bovbjerg writes.

At one time, Bovbjerg notes, the secretary of Labor was both the chairman and administrator of the PBGC. Since the enactment of the Pension Protection Act of 2006, the administrator of the PBGC has been a director who must be confirmed by the Senate.

Perhaps, because of the Labor Department’s historic dominance over the PBGC, “board representatives from the Department of Commerce and the Treasury have often deferred to DOL on administrative matters and not generally questioned DOL on its actions,” Bovbjerg writes.

But, the PBGC has disagreed with the Labor Department about matters such as buying computers and compensating personnel, and it is not clear how much authority the Labor Department has over the PBGC’s operations, Bovbjerg writes.

Because the Labor Department moved in 1992 to block PBGC efforts to use pension insurance premium revenue to develop its own compensation system, “some PBGC officials believe PBGC is limited in attracting and retaining the types of expert financial and actuarial staff it needs,” Bovbjerg writes.

In January 2007, “DOL officials orally directed PBGC to have no direct contact with [the Office of Management and Budget] without DOL’s approval, a condition that PBGC officials believe has strained the relationship between DOL and PBGC budget offices,” Bovbjerg writes. “DOL now closely monitors PBGC’s interactions with OMB by attending meetings and participating in telephone calls. DOL officials said that such action is needed to coordinate with PBGC in order to provide OMB examiners with a consistent message.”

Meanwhile, because the PBGC board relies mainly on the work of 3 cabinet secretaries, 3 board representatives and 3 staff people, “oversight of this $60 billion corporation that provides pension benefits to over half a million participants in terminated pension plans may be limited,” Bovbjerg writes.

Congress should consider strengthening the PBGC’s policy direction and oversight by expanding the corporation’s board to resemble those of the Federal Deposit Insurance Corp. and the Federal Crop Insurance Corp., Bovjberg writes.

The PBGC board also needs help from dedicated staff people who would be independent of the PBGC’s executive management, Bovbjerg writes.

A copy of the report is available