Wednesday, December 20, 2017

Pension Fund CEO on probation: UN Secretary-General Guterres to Pension Board: Do your job. 20 December 2017

UN Pension Fund CEO on probation. Secretary-General tells  Pension Board: do your job.  

A few months ago, UN Secretary-General Guterres showed his willingness to listen and act on his pledge to hold UN managers accountable. On 19 October 2017, he appointed Sudhir Rajkumar to replace Carol Boykin as his Representative for Investments at the UN Pension Fund, which has experienced chronic investment underperformance and other managerial deficiencies.

Now, the Secretary-General, through his Chef de Cabinet, Maria Luiza Ribeiro Viotti, has informed the Pension Board chair, Annick Vanhoutte, by letter dated 7 December 2017, that he has  accepted the Board’s recommendation to reappoint Chief Executive Officer Sergio Arvizu for a second term of three years. However, Arvizu' s continuation will be subject to an annual review of his performance. The practical effect of this decision is that the Fund’s CEO has been placed on probation, with a renewable one-year contract based on the Pension Board’s report of his “progress in addressing performance issues of the Fund.”

Recall that with the UN participant representatives under duress, the Board arrived at a fraught consensus last July, whereby it recommended a final three-year term for the CEO (instead of the five years sought by the CEO and his supporters) on the understanding that the Board would set up a search committee at its meeting next year and that the CEO would establish “clear deliverables, together with measurable performance metrics…for review and approval by the Bureau, in order to enable the Pension Board to annually measure his performance.”

The UN staff unions have been pushing for years for change in the Fund Secretariat, headed by the CEO, in the face of allegations of managerial deficiencies, gradually borne out by a General Assembly resolution (71/265), several reports of the Advisory Committee on Administrative and Budgetary Questions (ACABQ), the UN Board of Auditors, and three separate audits in the past year by the UN Office of Internal Oversight Services (OIOS). In addition, the UN Appeals Tribunal recently ruled as unlawful the Fund’s attempt to bar two elected UN participant representatives from participating in Board activities.

The UN staff unions' efforts met formidable opposition, and at times attempts at intimidation, each step of the way, from the Pension Board Chairs, current and former,  and some members, aided and abetted by the president and members of the UN retiree representative organization (FAFICS), and some UN Agency participant representatives.

The letter to Vanhoutte states clearly that in making his decision, the Secretary-General was taking new information into account, specifically two internal audit reports (by OIOS) detailing irregularities in procurement and contract management (2017/110) and post-implementation of the Fund’s information technology system (IPAS) (2017/104).  The letter notes that “these reports raise concerns for the Secretary-General regarding the management of the Pension Fund, and he expects the board to closely monitor both the resolution of such issues, as well as the implementation of the applicable recommendations made in these reports.”

Recall that Vanhoutte upbraided the UN participant representatives in a memo dated 13 September 2017 in response to their letter to the Secretary-General asking him not to reappoint the CEO. She told them in effect they were wasting their time since the Secretary-General merely does what he’s told by the Board regarding the CEO’s contract. (Quote from para. 7: “In forwarding its recommendations to the Secretary-General [the Board] is merely requesting the latter to initiate the necessary administrative actions in order to implement its recommendation. In other words, the Pension Board is not requesting the Secretary-General to exercise discretionary authority on these matters.”) Vanhoutte further challenged the UN Participant Representatives concerning allegations of managerial deficiencies on the part of the CEO to “prove it (“he who asserts must prove.”) She also wrote twice to the UN Administration (26 July and 10 August 2017) requesting that UN staff unions be barred from using the UN internal communication system.

No doubt Vanhoutte was surprised to read in the letter from the Secretary-General that he “holds the power of appointment of the Chief Executive Officer of the Fund, pursuant to Article 101 of the Charter of the United Nations and Article 7 of the Regulations of the Fund.”

The UN Agency participant representatives who wrote to the Secretary-General on 11 December 2017 attempting to discredit the UN participant representatives to get their man reappointed, may also be surprised to know that on 7 December, Vanhoutte had already received, and apparently failed to share with them, the Secretary-General’s decision rendering moot their letter to him sent four days later.

It's a shameful reality that despite all the documented information -- GA resolution, ACABQ reports, Board of Auditor reports, an OIOS audit 2017/02 that clearly pointed out mismanagement at the root of the unprecedented delay in pension payments, including to orphans and widows, and retirees (to which the Board gave scant attention in making its recommendation regarding the CEO’s reappointment) and the two recent OIOS audits  – the Board, FAFICS, and some UN Agency participant representatives, persisted in their efforts to ensure business as usual, and hang the effects on the health of our Fund. 

Well, now it’s a new day in the Fund. The Secretary-General has put the Pension Board Chair and its members, and the Chief Executive Officer, on notice:  the Board must step up and assume its responsibility for exercising oversight over the Fund and the CEO. While the Secretary-General has accepted the Board’s recommendation. “He will nevertheless reconsider the continuation of such appointment after taking into consideration a further recommendation by the Board next summer”.

In the meantime, “the Secretary-General expects that the Pension Board will closely monitor the performance of the Chief Executive Officer and ….will report to him on the progress made by the Chief Executive Officer in addressing the performance issues of the Fund.” Further, "in light of the requested further recommendation by the Board on the continuation of the appointment of the Chief Executive Office, the Secretary-General reserves the option to take appropriate action at that time."

Thank you Secretary-General Guterres for insisting on responsibility and accountability in maintaining our Fund's health.  Congratulations to the UN staff unions, and the UN participant representatives. They’ve fought hard and long and stepped into the breach on behalf of UN retirees where FAFICS failed to exercise its responsibility to its members. Reform of the Pension Board, both in its representativeness and exercise of oversight of the management of the Fund, is badly needed. The Board's performance (never mind the CEO's)  is on the line and the record is not encouraging. Time will tell if it's up to this important task. The Secretary-General, we're satisfied to note, supports us in safeguarding our Fund.

1 comment:

  1. A well thought decision by the SG: to request extra scrutiny on the PF Board shoulders while avoiding a bad precedent-setting decision to ignore the governance structure of the fund. I feel relieved with this outcome.