UN Pension Fund Hampered by Toxic Culture?
The United Nations is looking for a new chief investment officer to head its investment management division, which works on behalf of its Joint Staff Pension Fund — just months after an internal audit revealed accusations of a "toxic" workplace environment in the office.
The job listing comes after a tumultuous year for the complex $80 billion pension, which also faced a major resignation and investment volatility amid the coronavirus pandemic.
A spokesperson for the pension said via email that at the end of November 2020, the UN announced that its current CIO, Herman Bril, will leave at the end of the first quarter of 2021 after nearly five years in that role. Under Bril's tenure, the value of the fund's assets increased by more than 50 percent, the spokesperson added.
The new CIO will oversee the UN pension fund’s five portfolios, lead its sustainable investment team, and work as chair of the internal investments committee, the private markets committee, and the best execution committee, among other duties. The deadline to apply is February 21, according to the listing, which was published on January 8.
On March 29, 2020, the UN announced that the Representative of the Secretary-General for the investment of the pension fund’s assets, Sudhir Rajkumar, stepped down.
By the end of that month, just as the coronavirus pandemic was rocking markets, the pension fund’s assets dropped to $63 billion — a loss of $10 billion in a single month, according to a July report to the pension staff board. Those losses were recouped by the year’s end.
Rajkumar’s resignation also came amid an internal audit of the investment management office, which took place from February through May 2020. According to a July report from the UN, the audit revealed “divisiveness” among staff and a culture many called “toxic.”
“In addition to the perceived micromanagement by certain senior managers, the attitude and approach adopted by them in response to dissenting views and criticism were perceived as intolerant and even retaliatory,” the audit said.
This caused distrust, fear, and infighting among staffers, leading to several complaints and counter-complaints being filed, according to the report. The audit said the UN came across instances in which the performance evaluation process had been used against staff.
“Such conditions pointed to the lack of an appropriate tone at the top with regard to the highest ethical standards of behavior that are expected of officials entrusted with fiduciary responsibilities,” the report said.
“Since arriving in April 2020 as the Secretary-General’s new representative for the investments of the UNJSPF, Pedro Guazo has worked with staff to create a culture of harmony and high-performance where all feel they are empowered and heard,” the UN pension spokesperson said in a statement. “This effort to transform the culture and atmosphere in the office is based on the results of dialogue within the office, involving staff and management. This is a medium-term plan that will be monitored by management and internal auditors.”
A year before the publication of this audit, Rajkumar said in a statement included in the program budget that the UN’s Office of Investment Management was “in some respects malnourished” when he began his role in 2018. He noted that a benchmarking study conducted by a consulting firm showed that the office was understaffed by between 25 to 40 posts. Rajkumar did not respond to a request for comment by the time of publication.
“Specific gaps and staffing priorities were identified and additional investment staff were approved by the UN General Assembly,” a senior official in the UN Joint Pension Fund told Institutional Investor in February 2020. “The newly approved investment staff positions are expected to be filled during 2020, in accordance with UN HR rules and processes.”
According to the job listing, 85 percent of the pension fund, which is fully funded, is managed actively in-house. Its assets under management grew 11 percent in 2020, according to a December message published online by Rosemarie McClean, chief executive officer of pension administration, and Pedro Guazo, the representative of the Secretary-General who replaced Rajkumar.
Their message also revealed that the pension’s investment office will be allowed to use exchange-traded futures, swaps and foreign exchange forwards on a trial basis for two years in a bid to “strengthen risk management and efficiency and help us lower the transaction costs and hedge risks while implementing various investment strategies,” their message said.
Recall, back in November, I wrote a comment on why the UN Pension is kicking reforms down the road where I stated:
[...] I see bigger problems at the United Nations Joint Staff Pension Fund that are structural, not operational in nature.
In particular, they need to totally bomb the current governance framework and replace it to something akin to what Ontario Teachers' Pension Plan where Rosemarie used to work or CPP Investments or any of Canada's large pensions have in terms of governance.
Importantly, the UN pension fund should have an independent board where top investment and other professionals are appointed not by politics but by qualifications and this board has to be completely independent from the UN.
Huh? What? You heard me, get the UN completely out of the operations of its massive pension fund, let an independent board oversee senior managers who run the day-to-day operations of the Fund and they can publish a very transparent annual report of their activities every year.
What else? Move the hell out of New York City! The UN pension fund should be based here in Montreal. Not New York City and not even Toronto, the North American mecca for pensions but Montreal which is multilingual and has two of the largest pensions in Canada and tons of pension talent.
[Note: On the sixth of June 1946, toward the conclusion of the first PICAO Interim Assembly, Montreal, Canada was selected as the permanent headquarters of the International Civil Aviation Organization (ICAO), by 27 votes. I think the UN should move its pension fund here.]
I've been saying this for years: get the UN pension fund out of New York City and as far away from the UN as possible and more importantly, get the governance right once and for all.
Again, this is me, Leo Kolivakis, publisher of Pension Pulse talking, not Rosemarie McClean. I haven't exchanged a peep with Rosemarie since she assumed her new role and I suspect she is extremely busy and it's not an easy job to assume in the middle of a pandemic.
I have extremely strong views on the United Nations Joint Staff Pension Fund. I make no apologies whatsoever and I know enough about the UN and how much dirty politics goes on in that organization.
Too many people there are power hungry and they think they're smarter than everyone else, but when it comes to their pension plan, most of them are completely and utterly clueless as to how to improve its governance and what really needs to be done to improve it over the long run.
In short, get the United Nations out of managing anything in regards to its pension fund. Nominate an independent and qualified board, pay professionals to manage assets in-house and let them do their job focusing on the mission of the plan and what is in the best interests of its members over the long run.
Alright, maybe I was too harsh but the United Nations is a highly political, highly bureaucratic organization by its very nature and when it comes to its massive pension fund, they never got the governance right to make sure there is no undue influence and outside interference and there are plenty of politicos there who try to stick their nose into the UN Pension Fund.
Now we learn there was a "toxic" culture hampering the pension fund and the current CIO, Herman Bril, is resigning at the end of the first quarter.
I don't know much about Mr. Bril, he's obviously highly qualified, but in my experience, whenever someone else is brought in from the outside, oftentimes there is a cultural mismatch.
This was the case at Ontario Teachers' when they brought in Bjarne Graven-Larsen as CIO from Denmark where he was CIO of ATP. He is a brilliant guy but didn't fit well in that organization.
Mr. Graven Larsen was eventually replaced by Ziad Hindo, someone who worked at Teachers' for a long time and is a much better cultural fit.
Sometimes bringing in someone from the outside works out just fine as they bring new energy and fresh ideas. Look at Eduard van Gelderen who was appointed PSP Investments' CIO in 2018, he has meshed perfectly into that organization and is doing an outstanding job.
But sometimes bringing in someone from the outside brings a lot of angst and yes, toxicity.
Every organization has suffered from "toxicity", not just the UN Pension Fund.
Typically, it's due to one or two senior managers who abuse their power, are just terrible managers and quite honestly, don't deserve the responsibilities they are given.
The worst types of senior managers are arrogant, insecure weasels who only look after their best interests, and don't give a damn about their employees.
They keep things close to their chest, are not transparent and do not take the time to communicate openly with their team.
Luckily, these bad managers tend to have short careers but some are there a lot longer than needed and in the process, do immense harm to the organization.
Culture. Everyone talks about the importance of culture but very few organizations do the hard work which is required to promote and enhance great workplace culture.
And it's not just from the top down, every single employee needs to work hard to ensure that workplace culture is at the level it should be.
That comes down to values, ethics, hard work, being open, transparent and going the extra mile to help not only your boss but also your colleagues when needed and in return, they should reciprocate.
In many ways, this is all common sense but it only takes one jerk of a manager or a jerk of a colleague to ruin workplace culture.
Interestingly, with the pandemic, a lot more people are working from home.
I was talking to a former colleague of mine earlier who is now working at a major insurance company and they did a survey which found 60% of employees prefer working from home, 25% didn't care either way and only 15% wanted to go into the office.
If you ask me, it's not just because they avoid commuting to and from work, for a lot of people, they can avoid toxic workplaces and focus on their job.
How do you know if your organization suffers from toxicity? Any easy indicator is the turnover rate, if a lot of people are leaving your organization, or certain teams in your organization, it's a telltale sign of toxic culture (and other problems).
CEOs can't be privy to everything that is going on at their organization and sometimes they don't see toxic culture even though it's definitely there.
And addressing toxic culture is critically important because it impacts results.
Go back to read Part 6 and Part 7 of a series Mihail Garchev and I put together on total fund management where we discuss culture and how it impacts TFM capability.
Trust me, Mihail and I have seen our share of good and bad culture at pension funds (mostly good but it's always the bad that leaves scars on your mind).
I've always asked myself, is it the investment management industry which brings out the worst in some people or is it that every profession has rotten apples who are just toxic by nature.
Anyway, I've rambled on long enough but when I saw this article on the UN Pension, I couldn't resist to to use it to discuss toxicity at the workplace, especially at pensions.
The important point is it goes on everywhere, not just at the UN Pension, and it's critically important to address it because it truly is like a cancer which metastasizes and spreads, and it impacts not only results, but more importantly, the well-being of your employees.
Nobody wants to work in a toxic workplace, nobody. Life is too short to deal with toxic people at their workplace (both men and women).
Will the UN Pension Fund survive this toxicity? No doubt, it will, it looks like they've already implemented the right course of action.
As far as their search for a new CIO, I have a few outstanding people in mind, some that have worked with Rosemarie McClean at OTPP but others too (I don't need to list them, she knows them well).
Lastly, the good thing is the UN Pension remains fully funded and that truly is the best sign of a pension's health. Let's hope this continues and that they address these workplace challenges.
Below, Simon Sinek discusses the biggest mistake that companies make when trying to make cultural transformations, treating it like a marketing campaign and why purpose should be prioritized over metrics. Take the time to watch these clips.
But it's the third clip on empathy and perspective which I really want you to pay attention to, it's fantastic, one of his best speeches ever where he imparts sound wisdom for all leaders and employees. If you want to get workplace culture right, make sure you get the right leaders with their right empathetic attitudes.
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