On April 4th at the MPS National meeting, we introduced the MPS Action Plan. A central part of MPS’ Action Plan is to implement Board reform and these are the changes we would like to make:
MPS Plan For Board Reform
- Replace five of the eight union trustees, require that the new trustees all have financial literacy
- Bring investment expert onto the Board; require that all members of Investment Committee have financial literacy
- Bring an actuarial expert onto the Board
- Disclose on the AFM-EPF website the qualifications of each trustee; what skill they bring to the table
This simply means replacing many of the current trustees to make way for experienced financial, actuarial and investment experts to form a new team of consummate professionals that will work toward a sound future for our pension fund. Since we introduced this idea of Board reform we have gotten a lot of questions. The following is the answer to those questions and the case for new trustees.
Why should the current trustees be replaced?
There is now overwhelming evidence that this pension plan has been badly mismanaged by the trustees. Even more concerning is the trustees’ refusal to take any responsibility for their own actions. The trustees have produced the worst investment returns in their peer group of large pension plans, have the highest expenses of any fund in the entertainment industry, and cannot raise employer contributions even to the rate of wage inflation. MPS has published a piece entitled “A Track Record of Mismanagement” that you can access here to view our detailed analysis of the trustees’ self-serving and misleading claims on their performance.
The trustees are hoping that once our fund hits rock bottom and qualifies as critical and declining that pursuing cuts to benefits will stabilize our pension plan. But even if they get the cuts that they are looking for, there is nothing to prevent them from going back for additional cuts to benefits in the next 5 to 10 years or at any point in the future. The only way to prevent this from happening is to bring onto the Board competent, experienced and accountable trustees who are experts in their fields, particularly the investment and the actuarial fields.
The root problem with the AFM-EPF is bad governance. We have an entrenched, unaccountable and unqualified Board, and if this is permitted to continue, so will the mismanagement of our pension plan. Since December of 2016 when the pension crisis was first announced, our trustees have refused to hold those in charge, including themselves, accountable in order to be sure the same problems will never occur again. Without Board reform, there is every likelihood that the problems will continue.
Is it possible to replace the AFM trustees?
The procedures for replacing an AFM-EPF trustee are spelled out in Article 3 of the Trust document. According to Article 3:
• How many trustees does the AFM-EPF have: There shall be between 7 to 10 employer trustees and 7 to 10 (AFM) union trustees and there shall always be an equal number of employer trustees and union trustees. Currently, there are 8 (AFM) union trustees and 8 employer trustees.
• How long do trustees serve for: Trustees serve until death, incapacity, resignation or removal. In other words, there are no term limits.
• How are trustees removed from office: Any union trustee may be removed from office at any time without cause at the sole discretion of the AFM. Union trustees are subject to immediate removal and no reason need be given. It is a decision to be made by the AFM.
• How are new trustees appointed: In the event any union trustee is removed, the President of the AFM shall designate a successor union trustee. In other words, Ray Hair has wide discretion to choose trustees.
• Who can serve as an AFM trustee: The Trust sets forth no minimum qualifications for becoming a trustee. Nor does it limit the union trustees to members of the AFM. However, the AFM bylaws require that at least three union trustees be rank and file AFM musicians at the time they are appointed. Finally, there is no requirement that the President of the AFM (Ray Hair) be a trustee.
The Upshot: After many years of mismanagement it is clear that our Board lacks the skills, the insight and the accountability to be fully functional. Here are the important facts that every AFM member should know that are laid out in the rules that govern the AFM-EPF:
- Ray Hair can appoint five new AFM trustees immediately.
- Those five new AFM trustees do not have to be AFM members.
- Investment and actuarial experts can be brought into the Board of trustees immediately so the same problems that happened in the past do not repeat themselves.
Why have no trustees been replaced yet?
The answer to this question is yet again, unfortunately, a very simple one. No trustees, not a single one, have been replaced at this point because Ray Hair has chosen not to do so. If Ray Hair wanted to appoint new trustees with investment or actuarial acumen he could do it today. Instead in the face of a crisis at our pension fund, our AFM President Ray Hair has decided to do nothing.
What does this mean for AFM members who are concerned about their pension?
Ray Hair is sending a clear message to musicians across the country: he believes the trustees, both past and present have performed well. Trustee Tino Gagliardi echoes this sentiment in the January issue of Allegro by stating that, “every member of the Board of Trustees is doing our best to protect and preserve the pension fund into the future.” Unfortunately, their appraisal of the board's performance does not agree with the facts. Even more concerning is the fact that since December of 2016, Ray Hair has done nothing to remedy the situation even though it is clear that he has the power to make significant changes to improve the way our pension fund operates. Perhaps Ray Hair and the other trustees do not believe it is a requirement to be accountable to plan participants.