The March 18, page 1 article about my book, "The Trillion Dollar Promise," was very sensationalized and did not once mention what I told to the reporter at least a dozen times during the interview, and which appears in the book. That is, it is my sincere belief that most individuals involved in pension fund investments are honest and conscientious, and that most pension funds operate under the strict scrutiny of people who take their responsibilities seriously.
Alas, the reporter did not even take my suggestion to focus the article on the changes I recommended, but instead went for what sells newspapers. Perhaps I should thank him because it might even sell books. But that was not the reason I wrote the book. As corny as it sounds, I wrote the book in an attempt to bring much-needed change to our industry. We can pointlessly debate to what extent fraud, wrongdoing and questionable activities occur in our industry, but it would be incredibly naive to believe the largest accumulation of money in this country doesn't attract sharks. Besides, even if the vast majority of plans are well-managed and the assets of most pension funds are secure, why take a chance with the retirement well-being of millions of people? Things change. Senior management and other employees come and go. Priorities get rearranged. No one should think that just because a pension fund was safe in the past it will be secure in the future. Some very straightforward safeguards need to be put into place and, in my opinion, NOW. For once, let's correct something before it becomes a disaster.
These are some of the concrete recommendations I make in the book:
The negative incentives that block honest pension fund employees from reporting wrongdoing need to be removed. At the minimum, the anti-retaliation section of ERISA should be expanded to provide protection to employees who report wrongdoing to company senior executives.
Concurrent with the removal of negative incentives, the so-called "Lincoln Law" needs to be expanded to the pension fund employees who report the wrongdoing of senior executives. This extension would create a positive incentive for both employees to report wrongdoing and for senior executives to avoid it.
Section 415 of the federal tax code should be abolished with retirement checks from all plans, qualified and non-qualified, paid from the pension fund. This would more closely align the interests of senior executives with those of other plan participants.
Companies should use standardized, conservative interest rate assumptions and mortality tables, and be required to keep their pension plans fully funded.
The company's pension fund decision-making organization needs to be streamlined and focused. All bureaucracy and multiple reporting levels should be eliminated, and the chief investment officer and pension fund staff should report directly to the committee of the board of directors. Ideally, that committee would be chaired by a retiree.
There is absolutely no excuse - repeat, no excuse - for not having full disclosure of pension fund investments, policies, strategies and performance results. Now, the information required by ERISA is incomplete and incomprehensible to most plan participants. A detailed, readable pension fund annual report should be made available to all plan participants.
Trustees need to use some common sense in their auditing of the pension fund. Simply relying on the chief investment officer to select the auditor and monitor the depth of the audit is naive at best, a breach of fiduciary responsibility at worst.
The company needs to develop a code of ethics exclusively for pension fund-related personnel. The code of ethics should apply to everyone involved in pension fund investments, from secretaries to the board of directors. Moreover, pension fund suppliers should be made aware of the company's code and be required to abide by those parts which relate to them.
Companies should be required to include a copy of their code of ethics in their annual report to plan participants. All of the company's pension fund fiduciaries should be required to sign a statement attesting that they have personally lived up to the code's provisions.
The company needs to appoint to ombudsman to whom honest employees can report questionable activities in complete confidence. A compliance officer also should be appointed to handle ongoing ethical oversight.
Retirees must band together in an alliance in order to speak to boards of directors and senior executives with the power their numbers and collective ownership of common stock gives them.
Finally, a way needs to be found to make it absolutely clear that the assets in the pension fund - all the assets - belong to the plan participants. This would put the assets beyond the reach of outside corporate raiders and inside company executives alike.
Not leaving his "reporting" with the first article, in the April 1 issue the reporter wrote a scathing editorial column about my book and even engaged in amateur psychoanalysis, rather then accepting the truth - the book was a call for change, not a finger-pointing expose. Moreover, he, not me or my book, is recklessly trying to sully the reputation of Ameritech in a totally irresponsible manner through innuendo and speculation.
"The Trillion Dollar Promise," is not about finger pointing. Examples of fraud, wrongdoing and questionable activities are only given to provide a foundation for the rationale behind the concrete suggestions I made as to what trustees, plan participants and lawmakers can do to help safeguard pension assets. Had I only presented my recommendations, no one would have known what I was talking about. In my opinion, these recommendations deserve to be debated and, I believe, implemented.
But this reporter is entitled to his opinions. He also has the added privilege of commanding editorial space in a widely read magazine and if he chooses to try to trivialize an important book, he has the license to do so. Just so that you, the reader, will receive a more balanced view, however, here is what others had to say and what appears on the jacket cover:
"Jim Kujaca's 'Trillion Dollar Promise' is the long-awaited definitive book concerning the little understood U.S. pension fund industry. The 'Trillion Dollar Promise' provides an intimate glimpse beneath the veil of the private pension funds that millions of Americans (including me) hope will permit retirees to benefit from the fruits of their labors in the decades before 'downsizing' and 'disposable employees' became fashionable in contemporary corporate America.
"In this important new book, Mr. Kujaca provides insightful views of who really runs corporate pension funds, how much it costs to manage funds, and the way things ought to be. Throughout the book runs the important thread of fiduciary responsibility and the need for full and complete disclosure.
"Pension plans sponsors, investment managers, active and retired employees, and, most importantly, pension plan trustees will all benefit from this thoughtful analysis of today's pension fund mystery" - John W. English, retired vice president and chief investment officer, the Ford Foundation.
"This book provides some extremely interesting insights into the operations of pension funds and deserves to be read by both critic and practitioner" - Henry Kaufman, principal, Henry Kaufman & Co. Inc.
Each of you can make up your own mind. Me? I value the opinion of true professionals, not gadflies.
James A. Kujaca
Editor's note: Mr. Kujaca declined to answer any questions concerning the sources of his information or his own experience or the basis for his contention that widespread abuses occur. Also, among others executives, Mr. English was contacted for comment, but he didn't return the call.