That was the recommendation by consultant Cortex Applied Research after a broad evaluation of the pension system’s structure and board operations, according to The Baltimore Sun. Among the powers the trustees should consider giving up, according to the consultants, are the hiring of the chief investment officer and the selection of money managers.
Cortex representatives John Por and Tom Iannucci said the company based its recommendations on the board’s previously expressed interest in strengthening executive leadership and making management more accountable. In that vein, the board needs to stay focused on policy issues confronting the $24-billion system instead of micromanaging daily issues, the consultants said.
That suggestion would enhance the authority of Thomas Lee, the former deputy budget secretary who was hired as executive director last month. The consultants suggested that the management structure would balance the increased power Lee would wield by requiring greater accountability with performance reviews.
The consultants said the board should leave the hiring of the system’s chief investment officer to the agency’s executive director – subject to ratification by trustees. The investment chief’s position has been vacant since last month, when the board ousted Carol Boykin.
Lee’s predecessor, Peter Vaughn, took a generally hands-off approach to the agency’s investment division – leaving Boykin to report directly to the board’s Investment Committee or to former pension board Chairman Richard Dixon.
Vaughn and Boykin were forced out as a result of a management reshuffle engineered by Comptroller William Donald Schaefer, who replaced Dixon as chairman early last year. While Dixon was chairman in 2000 and 2001, the system’s investment performance fell to the bottom of national peer group rankings, and the fund lost millions of dollars to fraud and questionable investments by money managers, according to the Sun.
The Toronto-based consultants’ suggestion that trustees leave the selection of money managers to the staff ran into resistance from trustees. Retired state police Maj. Morris Krome told the Sun the recommendation may “fly in the face of fiduciary responsibility.”