Jack Ehnes said he thrives on challenges, and during his close to 20 years at the helm of the nation's second-largest public pension plan, there have been some doozies.
During Mr. Ehnes' tenure as CEO, officials at the California State Teachers' Retirement System, West Sacramento, have been tested by a funding crisis, efforts to replace public employee defined benefit plans with defined contribution plans, legislation to cut pension benefits and a worldwide pandemic.
This is Mr. Ehnes' second attempt at retiring from his post at CalSTRS. He originally announced on March 5, 2020, he would be retiring in September but, at the behest of the board, Mr. Ehnes delayed his retirement to continue leading the plan through the COVID-19 pandemic. He is now slated to retire from the $291.7 billion pension fund on June 30.
"The ask was not that hard because I love the organization," Mr. Ehnes said in an interview. "I do best when there are problems to work on."
And the pandemic presented issues CalSTRS had never faced before, he said. "It was a big challenge," he added.
During the pandemic, he helped guide the system through, among other things, the work-from-home transition, online board meetings, construction of a new headquarters, and implementation and expansion of CalSTRS' collaborative investment model.
Mr. Ehnes said he is most proud of the fact that, despite the challenges over the years, "we are here, we are strong, and we are delivering the benefits as promised. You always have to come back to the mission and that is No. 1."
What has helped CalSTRS officials work through challenges and take advantage of opportunities is its culture, he said.
CalSTRS officials have worked hard to ensure the continuity of its culture on the board and on staff, he said. Although the faces have changed, CalSTRS' culture of integrity, ethics and teamwork permeates the organization, Mr. Ehnes said.
"We have not seen the challenges others have," he said.
More and more, the board governance experts stress that boards need to understand the organization's culture and work to support it, Mr. Ehnes said.
"We have created a learning culture in our organization, which is why we have changed a lot. We have evolved, been nimble taking advantage of opportunities," he said.
Some people in the public sector complain a great deal about being in government due to the budgeting, purchasing and staffing constraints among other things, Mr. Ehnes said.
"There's an undercurrent that (governmental entities) should be more private," he said. "But private businesses are for-profit."
Instead, CalSTRS officials have chosen the best aspects of both worlds: the nimbleness, focus-on-cost effectiveness of a private financial services organization but with a clearly defined public purpose of acting solely for the benefit of its members, he said.
"We end up being a very strong mission-driven organization," Mr. Ehnes said.
Sustainability of the organization as well as the investment strategy is an important theme at CalSTRS.
"This organization values sustainability on an enterprise level, not just how we invest the money," he said.
CalSTRS has more than 400 retirees who are over 100 years old with the oldest being 109, he noted. What's more, female teachers who are CalSTRS beneficiaries live longer than other women, he said. So, CalSTRS officials work on ensuring that the organization be sustainable and built for the longer term, he added.
This includes making sure governance is front and center. When Mr. Ehnes joined CalSTRS in 2002, one of his first suggestions was that the board hire a fiduciary consultant, he said. The role, now filled by Mosaic Governance Advisors LLC, acts as another "set of eyes" to ensure CalSTRS abides by the highest fiduciary standards, Mr. Ehnes said.
CalSTRS' focus on governance extends to its staff, starting with new employee orientation, he said. CalSTRS officials make sure everyone abides by its code of conduct and ethical standards.
"To a person, they understand that CalSTRS is not here solely to deliver a 7% average annual return but to provide financial security for our members," Mr. Ehnes said.
For the majority of his time at CalSTRS, Mr. Ehnes has worked with the same CIO, Christopher J. Ailman.
"Jack and I have worked together for over 18 years, which is amazing and not common in our industry," Mr. Ailman said in a written statement.
While they each have their own management style, they share a common vision to make CalSTRS a global leader and to seek to fully fund teacher retirements, he said.
"Over the years, we have seen numerous trustees come and go, yet the board has also maintained a strong fiduciary focus to which, in part, I credit Jack's steady leadership and influence," Mr. Ailman said. "He has been a steady hand on the wheel for CalSTRS."
Mr. Ehnes' colleague across the river, Marcie Frost, CEO of the $460.8 billion California Public Employees' Retirement System, Sacramento, called him "a true advocate for retirement security for California's public school teachers."
"He's dedicated and committed and believes in public service, and we've been very fortunate to have such a strong partner in the pension industry," Ms. Frost said in a statement.
During Mr. Ehnes' tenure, CalSTRS faced a challenge that threatened its solvency. CalSTRS' funding crisis touched off by the 2007-2008 financial crisis was a "defining moment" for the system, he said.
CalSTRS' funding level fell significantly in the 2008 fiscal year after plan assets declined 25%, causing the funding ratio to fall to 87% as of the June 30, 2008, actuarial valuation from 121.6% a year earlier. By the June 30, 2013, actuarial valuation, CalSTRS' funding ratio had fallen to 66.9%.
"There was no doubt that legislative action was needed to cure the funding deficit," Mr. Ehnes said.
A California law passed in 2014 increased contributions of the state, school districts and employees, putting CalSTRS on the path to full funding.
"It took years of work with our stakeholders, (former Gov. Edmund "Jerry" Brown) and the Legislature to get alignment," he said.
In the end, CalSTRS got a funding solution that did that but also protected teachers' retirement security, he said. CalSTRS' funded ratio was 66% as of its June 30, 2019 valuation, a 2-percentage-point improvement from the prior year's valuation. CalSTRS is on track to eliminate the state and the employers' share of its unfunded actuarial obligation by 2046, according to a March 5 report to the board.
CalSTRS is the fourth state governmental agency that Mr. Ehnes has worked for. He grew up in Rochester, N.Y. and earned a bachelor's degree at Cornell University, Ithaca, N.Y., but moved to Nashville, earning his master's degree from Vanderbilt University. His first government job was working in the office of former Tennessee Gov. Lamar Alexander, who took office during a scandal. Mr. Alexander's predecessor Ray Blanton was under investigation by the FBI for selling pardons. Mr. Alexander "brought in a real ethical platform," he said. The experience informed Mr. Ehnes' view that maintaining the highest levels of ethics and integrity are essential for organizations, he said.
After he finished graduate school, he wanted to move West. Mr. Ehnes served as the Colorado Insurance Commissioner, deputy insurance commissioner and board trustee for the $52.1 billion Colorado Public Employees Retirement Association, Denver. Prior to CalSTRS, he worked for Great-West Life & Annuity Insurance Co. in Denver.
"I loved being an insurance regulator. To me it was exciting," he said.
There's a very strong tie to being a fiduciary because insurance regulators are solely focused on that customer, Mr. Ehnes said.
He had already grown passionate about public service when he got a call about the CEO position at CalSTRS.
Neither he nor his wife had ever been to Sacramento, but he thought it might be a good place to spend the next phase of his life. What sealed the deal was his interaction with the board during his job interview.
"In our CalSTRS history, we've had very strong trustees who have cared about the system and the care of the members," he said.
During the interview with the board, he felt good about the capable, involved board and its strong governance structure.
"From my perspective, to be successful you need to be a team," he said.
While there are always challenges working in the public sector, the next CalSTRS CEO will have the benefit of working on issues of sustainability and environmental, social and corporate governance issues during a time when recognition of their importance is "finally blossoming," he said. CalSTRS' search committee is so far scheduled to interview CEO candidates on May 5-7. A search subcommittee had conducted interviews in March.
"The U.S. is having a true awakening," Mr. Ehnes said. "I hope we will stay focused. It is truly an opportunity."
Indeed, Mr. Ehnes said he intends to work on issues of sustainability and the other big changes in the world in his retirement.
"I intend to stay very active," he said.
Mr. Ehnes is currently chairman of the FTSE Russell Green Industries Advisory Committee and vice chair of the FTSE Russell Sustainable Investment Advisory Committee, both in London. He is the board vice chair of the Global Reporting Initiative in Amsterdam. He also currently serves on the board of Ceres, an organization of investors and environmental organizations working on sustainability.
The future of the world's oceans, in particular, worries Mr. Ehnes.
"I am very concerned about the oceans. The quality of our seas is aligned with the quality of our lives," he said.