UK Academics Demand Inquiry into USS Pension Fund

More than 1,000 professors call for investigation into largest UK private plan’s deficit.

A group of more than 1,000 UK academics said an inquiry “is urgently needed” into the £60 billion ($76.2 billion) University Superannuation Scheme (USS) after one of its own board members said she was stopped from investigating whether the fund’s deficit was as large as it claimed. The group made its demands public in an open letter to the Financial Times.

“We believe the conduct of USS valuation over the last two years has brought the scheme into disrepute,” said the letter. “An enquiry is urgently needed to obtain the necessary information to assess the USS’s claims, review the conduct of the USS executive, trustees, and The Pensions Regulator, and ultimately to rebuild members’ and employers’ trust and confidence in the scheme.”

The letter added that “it would be appropriate for a select committee of parliament to investigate.”

The issue began when Jane Hutton, a professor of statistics at the University of Warwick and a board member of the USS since 2015, said she was prevented from trying to determine whether the largest private sector pension plan in the UK was exaggerating its deficit.

For more stories like this, sign up for the CIO Alert newsletter.

“My attempts to undertake my fiduciary duties as a trustee, to investigate concerns I had about the [November 2017] valuation, and to challenge advisers, met with repeated delays,” Hutton told the Financial Times. “I suspect the deficit has been substantially overestimated.”

In response to the allegations, USS CEO Bill Galvin, and David Eastwood, chair of the trustee board of directors, said in a statement that the organization took Hutton’s concerns “very seriously” and “have sought to address them in accordance with best practice, and have expended very significant resources in responding to her questions.”

They said that extensive information, analysis, and third-party assurance have been provided over several years as they have worked with Hutton to respond to her requests.

“No material changes were made to our valuation outcome as a result of any of these activities,” wrote Gavin and Eastwood, “nor have any material issues been raised by any of the expert advisers engaged by the trustee in relation to the 2017 valuation.”

The USS reported in its 2017 annual report that its deficit had risen to £12.6 billon from £5.3 billion in 2014 as a result of a significant decline in yields on low-risk UK government bonds during that period. However, it said that since then, the funding assumptions have been updated, and the deficit is now estimated to be £7.5 billion which, with assets of £60 billion, gives the plan a funding ratio of 89%.  

“The trustees have a fiduciary duty to act in the interests of scheme members,” said the letter from the academics. “If the trustees or the USS executive are unable to act in the interests of scheme members, then they should resign,” they wrote, adding that “if the employer and union appointed trustees are failing to act in the interests of the members, then it is the responsibility of UUK (via the Employers Pensions Forum) and of the UCU to replace the trustees.”


Related Stories:

UK Government Leaves Universities on Their Own to Deal with Increased Public Pension Costs

Union to Strike over Pensions at 61 UK Universities

Tags: , , , ,

UAW Pension Fund Urges Mylan to Bolster Pay Policy

Pension wants firm to recoup incentive compensation from execs who behave badly.

The UAW Retiree Medical Benefits Trust in Detroit, an autoworkers union pension plan sponsor, is calling for generic drug company Mylan to adopt a pay policy that would force senior executives to give back incentive pay if they are found to be guilty of misconduct.

The pension made the request in a shareholder proposal that will be discussed at Mylan’s annual general meeting of shareholders June 21. The proposal calls for the company to amend its clawback policy so it can recoup incentive compensation from a senior executive if there has been misconduct that causes “significant financial or reputational harm to Mylan.”

This would include not only senior executives who commit misconduct, but those who fail to manage or monitor conduct.

“In recent years, Mylan has faced regulatory actions related to misconduct in the marketing and sales of prescription drugs,” said the UAW pension in its supporting statement.

For more stories like this, sign up for the CIO Alert newsletter.

The pension noted that Mylan is facing multiple lawsuits for the alleged role it has played in America’s ongoing opioid crisis, and in 2016, the company settled with the US Department of Justice for $465 million related to overcharging Medicaid for its EpiPen product.  Additionally, Mylan has been named as a defendant in a multi-state lawsuit alleging that generic drug manufacturers colluded on drug prices.

“As long-term shareholders, we believe that compensation policies should promote sustainable value creation,” said the pension. “Recoupment policies with business-related misconduct triggers are a powerful mechanism for holding senior leadership accountable.”

Mylan currently has a clawback policy allowing recoupment of bonus and equity compensation gains resulting from misconduct that causes a financial restatement. However, the pension argues that the policy doesn’t provide for incentive compensation recovery in the event of other kinds of significant misconduct from a member of senior management who failed to properly monitor or manage risks related to the misconduct.

“In our view, significant damage can be caused by misconduct that does not necessitate a financial restatement,” said the pension, “and it may be appropriate to hold accountable a senior executive who did not commit misconduct but who failed in his or her management or monitoring responsibility.”

But Mylan won’t allow the proposal to be voted on at its general meeting. The company, which is registered in the Netherlands, said that allowing a vote on the proposal would go against Dutch law because the pension did not hold at least 3% of Mylan’s issued share capital as of April 22. However, the company’s board of directors said it is encouraging shareholders to attend the general meeting to discuss the proposal so that it can consider their views and perspectives.

“Mylan currently has a robust clawback policy in place that is applicable to all executives, and we remain fully committed to maintaining our policy in compliance with applicable rules and regulations,” said Mylan in an SEC filing, adding that it “believes that the shareholder proposal is unnecessary at this time.”

The UAW is the beneficial owner of 82,469 of the company’s ordinary shares that it has continuously owned for at least one year, which as of the end of trading May 31 was worth nearly $1.4 million.

Related Stories:

NY State Pension Reaches Agreements with Firms on Executive Pay

CalPERS Flexes its Proxy Muscles

Tags: , , ,

«