Ohio State Teachers’ Retirement System, Columbus, has lost Aon as a governance consultant after the firm resigned from the assignment, according to people familiar with the matter.
The $94 billion pension fund’s board recently tilted to a majority of self-proclaimed reformers who want to gut investment staff and move the pension fund to all index funds, citing a desire to restore a permanent 3% cost-of-living adjustment.
At the April 18 board meeting, Trustee Wade Steen reclaimed his seat after the 10th District Court of Appeals earlier that day ruled that Ohio Gov. Mike DeWine did not have the authority in May 2023 to remove Steen as his appointed investment expert on the STRS board before the completion of his four-year term.
DeWine originally appointed Steen for a term beginning Nov. 25, 2020, and ending on Sept. 27, 2024.
Steen has been vocal in his support of a grassroots movement of retirees and active Ohio teachers angry about reduced or eliminated annual COLAs. After DeWine appointed G. Brent Bishop as Steen’s replacement, Steen filed suit in June and stated in his complaint that Bishop “has wrongfully taken and is acting in, the position of the Governor’s appointed ‘investment expert’ to the STRS Board, the public office position to which Mr. Steen is legally entitled and from which Mr. Steen has been wrongfully removed.”
Steen’s restoration to the board creates a 6-5 majority in favor of the reformers.
Aon's fiduciary services practice was retained to implement recommendations by board governance consulting firm Funston Advisory Services, which conducted a fiduciary performance audit on the system in May 2022. Recommendations, which Funston said in its report were solely to “improve fiduciary performance to benefit current and future STRS members and beneficiaries,” included improvements in STRS’ use of committees, including a “revitalization” of investment and audit committees and the creation of a board governance committee.
Aon had already made recommendations on committee structure and made a presentation at the April 18 board meeting on enterprise risk management recommendations, and it had the development of a long-term strategic plan as part of an agenda of future actions.
That meeting ended following Steen’s return to the board. Steen halted proceedings at the meeting, citing a desire to take a ceremonial oath of office from a retired teacher despite having taken the oath from a STRS official when he originally took the board seat, according to a video of the meeting.
Shortly afterwards, Board Chairman Dale Price adjourned the meeting to protest from the reform trustees. Price said in a May 1 statement that the pension fund "was notified last week that Aon is terminating its agreement for the provision of board governance consulting services. The board may discuss next steps at the retirement board’s meeting next month."
In its 2022 report, Funston Advisory Services in its key conclusions and recommendations said that “continued board dissension may demoralize staff and lead to failure to retain/attract needed talent.”
With Aon’s resignation following the April meeting, STRS now currently has no firm to assist the fractured board in improving its governance practices. An Aon spokesperson declined to comment. Rick Funston, managing partner of Funston Advisory Services, could not be immediately reached for comment.
