Two executives at the Pennsylvania-based Public School Employees Retirement System have survived an effort by trustees to oust them from their positions due to investment underperformance.
On June 11, PSERS’ executive director Glen Grell and chief investment officer James Grossman were spared being put to a vote of no confidence after the vote was removed from the agenda during the meeting of board trustees.
Six of the public pension’s trustees — including three state cabinet members, a state senator, a former state treasurer and a state senator — proposed the vote of no confidence in a note sent to chair Christopher SantaMaria. The board’s 15 members hold absolute authority over the fund, which has more than 600,000 beneficiaries.
“As fiduciaries possessing a duty of loyalty to the beneficiaries of the retirement fund, it is our intention to request the immediate termination and replacement of the executive director and chief investment officer at the next meeting of the board on June 11, 2021.”
In the note, the six trustees explained the decision to call for the removal of Grell and Grossman Jr. was due to the fund’s US$62.4 billion [$75.72 billion] investment underperformance over the past 10 years.
“If [the] PSERS’ investment team had been as good as the best public plans over the last 10 years, those assets would be approximately US$80.87 billion [$98.13] If [the] PSERS’ performance had been simply average, those assets would be approximately US$67.73 [$82.19] billion,” the trustees wrote.
The note also included a number of allegations of governance failures by management, including the last-minute posting of materials prior to scheduled board meetings, the co-opting of the independent board selection process and the failure to adequately staff an office audit. Grell and Grossman Jr. were also accused of reaching out to media outlets to criticize the motivations of trustees.
While the executives may have survived the revolt of a large minority of board members, their tenure may be cut short by an altogether independent organization — the Federal Bureau of Investigation.
In May, the FBI issued subpeonas to Grell and Grossman Jr., as well as to two other members of the PSERS’ staff as part of a probe investigating the pension fund. Neither Grell or Grossman have been accused of any wrongdoing.
The letter alluded to these investigations. “To be clear and to avoid any suggestion to the contrary, our advocacy for this management change should not be interpreted to suggest that individual wrongdoing, as it relates to the federal investigations has occurred. Instead, we believe a management change is the necessary response to correct an irrevocable loss of trust and confidence that is the a consequence of persistent underperformance and repeated governance failures over the past 10 years.”
Last month, a similar clash occurred in Canada between a public pension fund and a union representing a minority of its beneficiaries. In May, the Ontario arm of the Canadian Union of Public Employees called for a third-party review of the Ontario Municipal Employees Retirement System’s investment strategies, returns and internal performance after the pension fund reported billions of dollars in losses for 2020.
In July 2020, the Alberta Investment Management Corp.’s board stepped in to close down a volatility trading strategy that had resulted in $2.1 billion in losses during the initial months of the coronavirus crash.