Absentee Trustees, II

Was the low turnout at the October 24 meeting of the New York City Employees' Retirement System trustees — the meeting at which the system's trustees are said by the city Law Department to have approved a shareholder lawsuit against Apple — an aberration or the rule? An editorial in yesterday's New York Sun reported that only one of the 11 trustees was actually in attendance at the October 24 meeting. Curious about whether there was a pattern of absenteeism, The Sun obtained attendance lists from all 21 meetings of the NYCERS board of trustees that took place in 2006. Those include both regular meetings and meetings of the investment committee, which includes all the trustees. The NYCERS annual report and Web site tell city workers these trustees are the ones looking after their $45 billion pension fund, and they are the ones that city law gives the responsibility of administering the retirement system. The trustees include the city comptroller, William Thompson Jr.; the public advocate, Betsy Gotbaum, and Mayor Bloomberg's finance commissioner, Martha Stark, as well as the presidents of the five boroughs and the chiefs of the three largest labor unions whose members are part of NYCERS.

What we found in respect of attendance can only be termed shocking to anyone who believes in the idea of showing up for work. The NYCERS trustee with the best attendance record was the public advocate, Ms. Gotbaum, who was the only one of the 11 who showed up at the October 24 meeting at which the Apple lawsuit was discussed. Ms. Gotbaum made it to 10 of the 21 meetings — a less than 50% attendance rate. That, as we said, was the best of the lot.

The chairwoman of the board, Mr. Bloomberg's finance commissioner, Ms. Stark, made it to just six of the 21 meetings, an attendance rate of about 29%. Or, to put a finer point on it, she skipped more than seven out of every 10 meetings. Ms. Stark was one of the candidates that Governor Spitzer wanted earlier this year to be considered as the New York state comptroller until Assembly Speaker Silver asserted his constitutional authority and backed Thomas DiNapoli for the post. A spokesman for Ms. Stark, Owen Stone, responded to a query about her poor attendance record by saying, "She has highly qualified delegates who represent the City's interest at board meetings." He also rejected the idea that the investment committee meetings, which Ms. Stark does not attend, should be counted together with the regular meetings, of which Ms. Stark attended six of 10.

The only other trustee who attended even a single one of the NYCERS meetings was the president of Manhattan, Scott Stringer, who showed up at three of the 21 meetings. As for the rest of them — the presidents of the other four boroughs, along with the city comptroller, Mr. Thompson, and labor leaders Lillian Roberts of DC 37, Carroll Haynes of the Teamsters, and Roger Toussaint, who was famously ordered jailed by a state judge as punishment for shutting down the city with a transit strike during the holiday shopping season — they attended not a single meeting. That's right, eight of the 11 NYCERS "trustees" attended not a single trustee meeting all year.

The New York City Administrative Code, 13-103, allows all of the NYCERS trustees except for the comptroller to designate representatives to attend the meetings. But it also allows the trustees to attend themselves, as one might imagine they might want to, given the importance of the responsibilities. The comptroller still hasn't offered us a justification for his absence at the meetings; he told one of our reporters last night that he refuses to talk to this newspaper. A former comptroller, Harrison Goldin, tells us that "when there were significant issues on the agenda," he used to attend the NYCERS meetings himself.

Attendance by the NYCERS board members was so sparse that at four "meetings" of the NYCERS "board of trustees" — February 10, April 10, June 8, and October 12 — not a single actual trustee was in attendance. Zero of the 11 trustees bothered to attend those meetings. The meetings went on anyhow, with an array of deputies, underlings, aides, representatives, and assistants making decisions about the management of $45 billion in public pension funds — decisions that, as in the case of the fund's holdings in Apple, extend to launching lawsuits against other entities, such as publicly traded companies, whose directors actually did deign to show up for their own directors meetings.

Now, if NYCERS were racking up a stellar performance, or even beating its own benchmarks by a percentage point or two a year, one wouldn't much care quite as much whether the trustees were playing hooky. As it is, the pension fund has been lagging its own not-very-ambitious benchmarks, once one accounts for the substantial fees and expenses the fund pays. Had any of the trustees other than Ms. Gotbaum attended the October 24 meeting, for example, they would have heard a report on total NYCERS performance for fiscal year 2006 to the effect that "If you take out the estimated fees of 12.2 basis points, it brings the results down to 9.71 against a benchmark of 9.83."

NYCERS has also been lagging its peers among large institutional investors. For the year ended June 30, 2006, for example, NYCERS's return of 9.71% after fees and expenses is significantly less than the 16.7% earned by Harvard University's endowment during the same period. Had NYCERS performed to Harvard's standard, it would have meant another $3.08 billion for the New York pension fund.

NYCERS also lagged more than two full percentage points behind the return earned by the state of California's public pension fund, CALPERS, which earned 11.8% after fees and expenses in the year ended June 30, 2006. Had NYCERS performed to CALPERS's standard in that year, it would have meant another $880 million in the pockets of New York retirees. A CALPERS spokeswoman, Patricia Macht, told us that only three of the 13 CALPERS board members are allowed to send someone other than themselves to attend the board meetings, and that even those three members sometimes make appearances in person.

New York taxpayers will be on the hook for any shortfall in meeting pension obligations. So the performance of NYCERS is significant not only for retired public employees but also for all taxpayers. Instead of focusing on performance, those running NYCERS have been sidetracked, approving requests by class-action lawyers who are seeking to use the fund's good name and large size to position themselves for large legal fees in lawsuits against companies whose directors actually attend meetings. It's enough to make one wonder whether the reason these trustees aren't showing up in person is that they don't want to be blamed for what NYCERS does.