The UN Pension Board's 66th session in Nairobi, 22 to 26 July, is almost over.
While we'll find out soon enough what its members have done with the sweeping GA reforms contained in resolution A/RES/73,/274, there have been some disquieting signs for some time.
An example was the Board's obvious flouting of the GA’s directive regarding the composition of its Governance Working Group that has been considering several of the proposed reforms for presentation to the Board.
The dysfunction in the Fund Secretariat, currently under Acting CEO Janice Dunn Lee, will be on full display with what's reportedly deliberate and massive misrepresentation of the backlog in pension payments, and a proposed decapitation of the Geneva office for reasons reportedly not based in fact.
The Board will hear from the Representative of
the Secretary-General for Investments who’s reportedly shaking up the Office of
Investment Management (OIM) and in the process encountering opposition from some staff who
apparently don’t share parts of his vision for the OIM.
Major items on the Board’s agenda
As a main item on the Board’s plate is the GA directive in paragraph 14 of its resolution A/RES/73/274, which states that the
“Pension Board established a working group, which should adhere to the
tripartite structure of the Board, to consider…” issues including “(b) The
composition and size of the Board, including the role of retiree
representatives and the modalities for directly electing retiree
representatives to the Board.”
Disregard of the tripartite structure
Note in the above paragraph of the GA
resolution that the Board “should adhere to the tripartite structure of the Board”.
In direct opposition to the GA resolution, the Board’s Governance
Working Group includes FAFICS (UN retiree representative organization) representatives, who are not among
the Board’s tripartite membership, which consists of (i) governing bodies; (ii) executive
heads; and (iii) participant representatives elected by staff members.
Direct election of retiree representatives to the Board
Most specifically, FAFICS vehemently opposes the
internal auditors ‘ recommendation 3 (page 10, of A/73/341) for direct election
of retiree representatives to the Board:
“Recommendation 3. The Board should determine the number of seats to be
allotted to retiree representatives and facilitate their direct election as
full Board members with voting rights to ensure transparent and democratic
representation of beneficiaries and their interests”.
(See link below to open letter to the USG OIOS dated 5 March 2019 signed
by 297 AFICS/NY members supporting direct election of our representatives, and letter also dated 4 March 2019 to the USG OIOS from the then FAFICS president,
Linda Saputelli, attempting to pre-empt our letter).
Note: See also below letter from James M. Mutiso (AFICS Kenya), which represents 1500 UN retirees residing in Kenya, strongly aligning with our letter of 5 March 2019 to the USG/OIOS.
Note: See also below letter from James M. Mutiso (AFICS Kenya), which represents 1500 UN retirees residing in Kenya, strongly aligning with our letter of 5 March 2019 to the USG/OIOS.
Separating the dual roles of the CEO
There have been disquieting signs for some time about foot-dragging by the Board on GA reforms. Here, for example, the Board states in its note describing the upcoming annual meeting (on the Fund website, link below):
“[In Nairobi] the Board will consider the recommendations of the
Governance Working Group established last July that concern issues such as the
size and composition of the Board and the creation of the separate post of the
Secretary of the Board.”
Here’s the actual directive in paragraph 13 of GA resolution
A/RES/73/274 regarding separation of the dual roles of the CEO:
"13. Also notes the
current dual role of the Chief Executive Officer and Secretary of the Pension Board,
and decides to replace the existing post by two distinct and independent posts,
namely, “Pension Benefits Administrator” and “Secretary of the Pension Board”,
by no later than January 2020;”
The operative word is “decides”. The GA made a decision
and the Board must implement it. But the Board already showed what it thought
about the decision when, last April, it collaborated with UN Human Resources to falsely
advertise the job vacancy as “Chief Executive Officer (CEO) – Pension Fund
Administrator”, later reissued as “Chief Executive Officer (CEO)
– Pension Benefits Administrator", for an initial five year term with the
possibility of an additional five years.
According to the Board's note, it's slated to "decide on the new CEO/Pension Benefit Administrator" at its current session. There's scant reason for optimism given the performance thus far of the Board's Succession Planning Committee.
Subsidiary with "ultimate responsibility"?
A note from the Pension Board on the Fund website titled "The United Nations Joint Staff Pension Board: what to expect from the forthcoming meeting?" describes the Board's relationship with the General Assembly as follows:
"The Pension Board is a subsidiary organ of the United Nations General Assembly. The Pension board has the ultimate responsibility for the administration of the Fund and it protects the best interest of the UNJSPF participants and beneficiaries by setting strategic goals and policies, providing general oversight and monitoring."
The use of the word "ultimate" here is cause for concern, given the Board's dismal oversight record. The Internet definition of "subsidiary" is "an enterprise controlled by another". Thus, the General Assembly controls the Pension Board. The General Assembly, the body calling for sweeping governance reforms, not the Pension Board, the body strenuously resisting those reforms, is "ultimately" responsible for the Fund's effective functioning, for our sake, current and former UN staff -- the owners of the Fund.
According to the Board's note, it's slated to "decide on the new CEO/Pension Benefit Administrator" at its current session. There's scant reason for optimism given the performance thus far of the Board's Succession Planning Committee.
Subsidiary with "ultimate responsibility"?
A note from the Pension Board on the Fund website titled "The United Nations Joint Staff Pension Board: what to expect from the forthcoming meeting?" describes the Board's relationship with the General Assembly as follows:
"The Pension Board is a subsidiary organ of the United Nations General Assembly. The Pension board has the ultimate responsibility for the administration of the Fund and it protects the best interest of the UNJSPF participants and beneficiaries by setting strategic goals and policies, providing general oversight and monitoring."
The use of the word "ultimate" here is cause for concern, given the Board's dismal oversight record. The Internet definition of "subsidiary" is "an enterprise controlled by another". Thus, the General Assembly controls the Pension Board. The General Assembly, the body calling for sweeping governance reforms, not the Pension Board, the body strenuously resisting those reforms, is "ultimately" responsible for the Fund's effective functioning, for our sake, current and former UN staff -- the owners of the Fund.
Decapitation of the Geneva office
As reported on the blog on 8 July 2019 (link below) there are indications that Janice Dunn Lee, Acting CEO, has
jumped on board of the consistent attempts of the Fund Secretariat leadership
to grossly underreport the backlog in pension payments.
She’s now reportedly taken up the former CEO’s determination to decapitate the Geneva office to bring two of its three senior posts to New York. One reason is reportedly to promote the Head of Client Services in New York from the P5 to D1 level.
And the premise she’s using, supposed declining performance
of the Geneva staff in benefit processing, is reportedly simply not supported by
the facts. AFICS
Geneva has written to Dunn Lee setting out the potential negative impact of
this move (see below).
Grossly underreporting the backlog
As also noted in the 8 July 2019 blog article, while Dunn
Lee repeats the mantra that “there is no backlog” and only 780 “real” cases of
retirees or separated staff waiting to be paid, there are reportedly thousands
of cases that are unprocessed for various reasons including missing
documentation that is not followed upon, and 1,299 separated staff waiting to
be paid.
Investments
Some Fund
observers have noticed that there appear to be frequent and less detailed reports
on investments since the RSG Sudhir Rajkumar took office in January 2018.
His last note on the Fund website, dated 4 February 2019 (link below), was posted almost six months ago. Given that there are no longer monthly investment reports on the Fund website, members are overdue for an update.
His note describes 2018 as a “challenging year in global financial markets”. Observing that “Investment returns during December 2018 were the worst for that month in any year since 1931", he reports that the market assets of the Fund tumbled to $60.4 billion at the end of 2018 (from $65 plus) and rebounded to $63.6 billion at the end of January 2019. (Market assets are reflected as $65.2 billion today on the Fund website).
His last note on the Fund website, dated 4 February 2019 (link below), was posted almost six months ago. Given that there are no longer monthly investment reports on the Fund website, members are overdue for an update.
His note describes 2018 as a “challenging year in global financial markets”. Observing that “Investment returns during December 2018 were the worst for that month in any year since 1931", he reports that the market assets of the Fund tumbled to $60.4 billion at the end of 2018 (from $65 plus) and rebounded to $63.6 billion at the end of January 2019. (Market assets are reflected as $65.2 billion today on the Fund website).
The RSG’s note further states that “preliminary unaudited numbers indicate that the Office of Investment Management achieved its stated goal of meeting or exceeding the returns of the Policy Benchmark during 2018." Further, the Fund continues to “exceed by a healthy margin
our Long-Term Objective of 3.5% real (net of inflation) return in US dollar
terms over 10 to 15-year periods”.
The RSG strikes an optimistic note about expected further market volatility in the near term. “At the same time, our fully funded status gives us a certain amount of financial cushion to withstand a period of low investment returns.”
The RSG strikes an optimistic note about expected further market volatility in the near term. “At the same time, our fully funded status gives us a certain amount of financial cushion to withstand a period of low investment returns.”
Organizational change disorder?
On the management side, there are reports that the RSG is moving to significantly expand staff, both established and temporary, in the OIM and making changes in assignments and reporting channels.
On the management side, there are reports that the RSG is moving to significantly expand staff, both established and temporary, in the OIM and making changes in assignments and reporting channels.
He’s
also reportedly taking a more hands-on approach to investments than has been the practice thus far,
including more direct involvement in particular investment decisions. These moves have resulted in reports of some staff feeling sidelined by these changes and concerned about their impact on the system of checks and balances.
The RSG has an extensive World Bank background. He may be operating from the perspective of a “shake-up”, along the lines of the Internet definition”: “making changes in the way that a company is
organized so that it is more effective or successful”.
This, however, is the UN, as stodgy and bureaucratic an organization that ever graced the planet. Plus, (the Fund celebrates its 70th anniversary this year) our Fund has a 70-year track record of a conservative and sound investment policy that has mostly served its members well.
There’s also the well-known adage that one must break eggs to make omelets. At the same time, there's value in maintaining a balance between established systems that have demonstrated their durability over the Fund’s relatively (with some hiccups) stable and sound investment history, and the reality that among UN offices, the group responsible for the health and growth of current and former staff’s life-savings may need to adjust and change for the sake of improving performance.
There’s also the well-known adage that one must break eggs to make omelets. At the same time, there's value in maintaining a balance between established systems that have demonstrated their durability over the Fund’s relatively (with some hiccups) stable and sound investment history, and the reality that among UN offices, the group responsible for the health and growth of current and former staff’s life-savings may need to adjust and change for the sake of improving performance.
Any organization going through change and adjustment risks falling into “organizational change disorder”, described in a Forbes article (link below) as when leaders (quote) “succeed brilliantly as a visionary yet fail to ignite [their] executive team and employees to execution.”
Currently, it's unclear whether the changes underway will have improved investment management as their end result. We're keeping our eyes and ears open.
In any case, change in any organization simply won’t be effective or sustainable without buy-in from the team, which must include mutual understanding as well as respect for due process for all concerned. There could be some organizational change therapy called for here.
In any case, change in any organization simply won’t be effective or sustainable without buy-in from the team, which must include mutual understanding as well as respect for due process for all concerned. There could be some organizational change therapy called for here.
Clear-eyed realism and continued vigilance
While we wait and see what kind of omelets the RSG may
produce with his reported egg-breaking in the OIM, there’s little current cause for
optimism regarding the Board or the Fund Secretariat. The leaders of both
are more known for their tendency to throw eggs (reference the Board's failed attempt
to discredit the OIOS auditors) while often producing little of anything that's edible.
There were suggestions after the devastating UN internal
governance audit that our Fund would benefit from suspension of the Board while
it underwent professionalization, with interim oversight entrusted to an outside body. While that option may not
be currently on the table, we should consider it a possibility for the future.
In the meantime, we'll maintain vigilance on both sides of the Fund and realism about much-needed reforms coming out of this week’s annual meeting. Hope springs eternal.
In the meantime, we'll maintain vigilance on both sides of the Fund and realism about much-needed reforms coming out of this week’s annual meeting. Hope springs eternal.
http://unpension.blogspot.com/2018/03/open-letter-to-heidi-mendoza-un-retiree.html
http://unpension.blogspot.com/2019/07/un-pension-fund-toxicity-and-resistance.html#more
https://www.unjspf.org/the-united-nations-joint-staff-pension-board-what-to-expect-from-the-forthcoming-meeting/?
https://oim.unjspf.org/report/unjspf-news-message-from-the-rsg-february-2019/
https://www.forbes.com/sites/forbescoachescouncil/2019/05/13/how-to-cure-organizational-change-disorder-and-promote-innovation/#750b681283ac
http://unpension.blogspot.com/2019/07/un-pension-fund-toxicity-and-resistance.html#more
https://www.unjspf.org/the-united-nations-joint-staff-pension-board-what-to-expect-from-the-forthcoming-meeting/?
https://oim.unjspf.org/report/unjspf-news-message-from-the-rsg-february-2019/
https://www.forbes.com/sites/forbescoachescouncil/2019/05/13/how-to-cure-organizational-change-disorder-and-promote-innovation/#750b681283ac
Letter from AFICS Kenya
Letter from AFICS/Geneva
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