The ERISA Advisory Council needs to take a lesson from the SEC: Make all your recommendations public at the open meeting at which you approve them. The Securities and Exchange Commission presents recommendations at an open meeting, where the commissioners vote on them. The public gets the report at the same time. But not so the ERISA Advisory Council's soft-dollar working group.
The council -- a citizens' group set up under the Employee Retirement Income Security Act to influence policy proposals of the Labor Department's Pension and Welfare Benefits Administration -- earlier this month held an open meeting in which members voted on soft-dollar recommendations. But the council refused to release the recommendations, so members of the press and public attending the meeting had no idea what was being approved or rejected.
Soft dollars, the practice of directing brokerage commissions to specific firms in return for investment research or other products and services, is one of the most contentious issues in institutional investment management. Yet the advisory panel made the issue even more contentious -- and unnecessarily so -- when it refused to release the recommendations.
Instead, the group will keep the public in the dark for about a month, until it presents the report to Labor Secretary Alexis Herman, to give her time to read it before the media can dissect the recommendations.
At the same recent meeting, two other working groups of the council publicized their recommendations on their respective issues. Yet the soft-dollar group spoke at the meeting in arcane terms to hide the recommendations. This group, financed by taxpayers, is required to meet in public. Its refusal to disclose its recommendations is contemptuous of its mandate.
But a privileged few will know, especially members of the council, most of whom are active in the pension community. Among those privileged are Thomas J. Healey, partner, Goldman Sachs & Co.; Thomas J. Mackell Jr., executive vice president, Simms Capital Management Inc.; Carl S. Feen, consultant, CIGNA Financial Advisors; Marilee P. Lau, partner, KPMG Peat Marwick; Zenaida M. Samaniego, vice president and actuary, Equitable Life Assurance Society of the United States; J. Kenneth Blackwell, treasurer, state of Ohio; Michael R. Fanning, chief executive officer, Central Pension Fund International Union of Operating Engineers and Participating Employers; and James O. Wood, executive director, Louisiana State Employees' Retirement System.
The working group studied the issue for a year, meeting in public and hearing testimony from 19 people. This was a formidable array of comment. Those appearing included Charles Tschampion, managing director-investment strategy, General Motors Investment Management Corp.; Roland M. Machold, director, New Jersey Division of Investment; and Gary B. Findlay, executive director, Missouri State Employees' Retirement System.
The group isn't the only one considering the issue. A task force of AIMR plans to publicize next month its proposed standards for "best practices" conduct on soft dollars for money managers of fiduciary assets.
Soft-dollar practices have been too long cloaked behind curtains. By shrouding its proposals, who is the ERISA Advisory Council serving? The public it supposedly represents? Or the soft-dollar industry?
