Lloyd Knudsen's speech to STRS Board, February 14, 2008

My name is Lloyd Knudsen. I was a 30-year teacher in the Woodridge Local Schools of Summit County. I did not attend the two day STRS January retreat but did receive several e-mail summaries of the proceedings. I would like to offer a few retiree observations on the governance issues that were discussed.

On recurring theme of the retreat presenters was that the STRS Board should be "policy-focused" rather than "operationally-focused." That philosophy sounds good; however, oftentimes the two are intertwined. Let me give you an example.

Board members are asked by the Executive Director to approve an "operating" expense (like paying for an STRS associate's legal fees). A Board member questions whether this is a proper "operating" expenditure according to established Board "policy" or expresses his uncertainty whether this expense is even covered under established Board policy. Is this Board member doing his fiduciary duty to our STRS system or is he just being a "micromanager"?

The retreat presenters emphasized that Board members need to be ACTIVE OVERSEERS of Board policies by asking the right questions of STRS staff; that Board members must act at the level of prudent experts in all STRS matters; and that Board members cannot abdicate their duties to the STRS staff. One presenter summarized it all by saying Board members are "ultimately responsible for everything" done at STRS.

So let me ask the question again. Is the Board member who questions an STRS action or expenditure that he believes to be wrong doing his fiduciary duty to our STRS system or is he just being a micromanager?

A second theme of the retreat noted the acrimonious relationship among Board members and the adversarial tone many STRS meetings have taken. We've had Boards in the past where "never was heard a discouraging word" among members. Please don't mistake Board meetings that are quiet and friendly for effectiveness.

Some of our past Boards quietly spent our pension money on lavish parties and trips for themselves; some of our past Boards quietly accepted gifts for themselves from our STRS vendors and then quietly had to defend themselves in court; many of our past Boards quietly did nothing to head off our impending health care fund crisis; another past Board quietly hired former Executive Director Herb Dyer, who quietly proclaimed STRS needed to get out of the health care business altogether; and finally, another past Board had to quietly show Mr. Dyer the door. However, not before handing him his half million dollar going away present that yet another past Board had quietly negotiated. I repeat: don't mistake quiet and friendly with effectiveness.

If a Board member is fighting for me and my fellow retirees, I expect at times voices to be raised and feelings to get hurt. As your retreat presenters emphasized, your job is to be ACTIVE OVERSEERS of all things STRS. Sometimes active oversight is neither quiet nor friendly.

Hopefully this Board will hire the next Executive Director who is not threatened by a major challenge such as restoring our health care program or a minor challenge such as having a few active overseers on this Board. The candidate who balks at these challenges is not the right man or woman to lead STRS.

Another governance issue I would like to comment on is this idea of our STRS Board needing to present a "unified public face" or, as OEA puts it, "speak with one voice". I agree it would be an extremely positive action for this Board to unanimously approve our next Executive Director. However, on all other Board votes I don't see the importance of everybody agreeing. Who speaks for this Board? The majority vote on each particular topic speaks for this Board whether the vote is 10-0 or 6-4.

One point of comparison, our United States Supreme Court has nine justices on it. They vote on far more important national issues than STRS Board members do. Yet when the final court vote is 5-4, for example, the majority publishes their rationale for voting AND the minority publishes theirs, too. STRS Board members do not need to apologize for how they cast their vote.

Let me conclude by saying this Board spent a good part of your retreat listening to presenters who advised you to work together, to respect one another and to foster an atmosphere of collaboration. I'm sure you all nodded your heads in agreement and promised to try harder. Yet that very afternoon, after Dr. Leone left your meeting early, the remaining Board members passed a resolution that made a mockery of that promise. It's easy to talk the talk. But this board failed miserably in its first test of actually walking the walk.

Thank you for letting me speak to you today.