Board Governance - POLICY TYPE - GOVERNANCE PROCESS

(Adopted September 14, 1999, with amendments through November 15, 2007)

Global Governance Commitment
Governing Style
Board Job Description
Agenda Planning
Chairperson's Role
Board Members' Code of Conduct
Board Committee Principles
Board Committee Structure
Cost of Governance

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Global Governance Commitment

The purpose of the Board, on behalf of the members and beneficiaries, is to see that MOSERS: (1) achieves appropriate results for appropriate persons at an appropriate cost, and (2) avoids unacceptable actions and situations.

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Governing Style

The Board will govern with an emphasis on: (1) outward vision rather than an internal preoccupation, (2) encouragement of diversity in viewpoints, (3) strategic leadership more than administrative detail, (4) clear distinction of Board and Chief Executive roles, (5) collective rather than individual decisions, (6) the future rather than past or present, and (7) proactively rather than reactivity.

Accordingly:

1. The Board will cultivate a sense of group responsibility. The Board, not the staff, will be responsible for excellence in governing. The Board will be the initiator of policy, not merely a reactor to staff initiatives. The Board may use the expertise of individual members to enhance the ability of the Board as a body, rather than to substitute the individual’s judgments for the Board's values.
   
   
2. The Board will direct, control, and inspire the organization through the careful establishment of broad written policies reflecting the Board's values and perspectives. The Board's major policy focus will be on the intended long-term impacts outside the organization, not on the administrative or programmatic means of attaining those effects.
   
   
3. The Board will enforce upon itself whatever discipline is needed to govern with excellence. Discipline will apply to matters such as attendance, preparation for meetings, policymaking principles, respect of roles, and ensuring the continuance of governance capability.
   
   
4. Continual Board development will include orientation of new Board members in the Board's governance process and periodic Board discussion of process improvement.
   
   
5. The Board will allow no officer, individual, or committee of the Board to hinder or be an excuse for not fulfilling its commitments.
   
   
6. Unless directed otherwise by the Board, the Executive Director, the Chief Counsel, the Board Secretary, and MOSERS’ staff/current service providers selected by the Executive Director shall attend executive session during a Board meeting. The Board may also allow members of the public to attend relevant portions of executive session, including a board member’s individual staff, if the Board believes the person will aid the Board in its deliberation of a specific issue and will maintain the confidentiality of all such deliberations.
   

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Board Job Description

Specific job outputs of the Board, as an informed agent of the members and beneficiaries, are those that ensure appropriate organizational performance.

Accordingly:

1. The Board will produce the link between the organization, members, and beneficiaries.
   
   
2. The Board will produce written governing policies that at the broadest levels address each category of organizational decision.

1. Ends: Organizational products, impacts, benefits, outcomes, recipients, and their relative worth (what good for which recipients at what cost).
   
   
2. Executive Limitations: Constraints on executive authority that establish the prudence and ethics boundaries within which all executive activity and decisions must take place.
   
   
3. Governance Process: Specification of how the Board conceives, carries out, and monitors its own task.
   
   
4. Board-Executive Director Linkage: How power is delegated and its proper use monitored; the Executive Director role, authority, and accountability.
   

3. The Board will produce assurance of Executive Director performance (against policies in 2a and 2b).
   

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Agenda Planning

To accomplish its job products with a governance style consistent with Board policies, the Board will follow an agenda which: (a) completes a re-exploration of Ends policies annually and (b) continually improves Board performance through Board education and enriched input and deliberation.

1. The cycle will conclude each year on the last day of December, so that administrative planning and budgeting can be based on accomplishing a one-year segment of the Board’s most recent statement of long-term Ends.
   
   
2. The cycle will start with the Board’s development of its agenda for the next year.
   

1. Governance education and education related to Ends determination, (e.g. presentations by futurists, demographers, advocacy groups, staff, etc.) will be arranged in the first quarter, to be held during the balance of the year.
   
   

3. Executive Director monitoring will be included on the agenda if monitoring reports show policy violations or if policy criteria are to be debated.
   
   
4. Executive Director remuneration will be decided after a review of monitoring reports received in the last year during the month of November.
   
   
5. Any individual Board member who wants to raise an issue to be placed on the agenda should notify the Chairman of the Board who in turn will make a determination as to whether or not to put the item on the agenda of the next Board meeting.
   
   
6. Any individual Board member who wants to propose a change to the system’s governance policies shall submit draft text of the proposed change to the Chair and the Executive Director at least two weeks in advance of the board meeting at which the individual Board member wants it to be considered. The Executive Director will immediately distribute the draft to all other board members and establish a deadline for submission of comments, questions, or proposed changes. If alternative language is submitted, staff will prepare additional draft documents, highlighting the changes from the original and indicating who submitted it. Staff will also provide side comments believed to be relevant to the issue. All versions available will be distributed to the board via the board packet at least one week in advance of the board meeting at which the matter is to be considered. This process is intended to provide all Board members with an adequate opportunity to consider proposed changes offered by any Board member prior to a board meeting. The process will not preclude the Board from making amendments to any governance policy during a board meeting.
   
   

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Chairperson's Role

The Chairperson assures the integrity of the Board's process and, secondarily, occasionally represents the Board to outside parties.

Accordingly:

1. The job result of the Chairperson is that the Board behaves consistently with its own rules and those legitimately imposed upon it from outside the organization.

1. Meeting discussion content will be only those issues, which according to Board policy, clearly belong to the Board to decide, not the Executive Director.
   
   
2. Deliberation will be fair, open, and thorough, but also timely, orderly, and kept to the point.

2. The authority of the Chairperson consists in making decisions, which fall within topics covered by Board policies on Governance Process and Board-Executive Director Linkage, with the exception of: (a) employment or termination of an Executive Director, and (b) where the Board specifically delegates portions of this authority to others. The Chairperson is authorized to use any reasonable interpretation of the provisions in these policies.

1. The Chairperson is empowered to chair Board meetings with all the commonly accepted power of that position (e.g., ruling, recognizing).
   
   
2. The Chairperson has no authority to make decisions about policies created by the Board within Ends and Executive Limitations policy areas. Therefore, the Chairperson has no authority to supervise or direct the Executive Director.
   
   
3. The Chairperson may represent the Board to outside parties in announcing Board-stated positions and in stating Chair decisions and interpretations within the area delegated to her or him.
   
   
4. The Chairperson may delegate this authority but remains accountable for its use.

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Board Members' Code of Conduct

The Board commits itself and its members to ethical, businesslike, and lawful conduct, including proper use of authority and appropriate decorum when acting as Board members.

Accordingly:

1. Members must have loyalty to the ownership, un-conflicted by loyalties to staff, other organizations, and any personal interest as a consumer.
   
   
2. “All property, money, funds, investments, and rights which shall belong to, or be available for expenditure or use by, the System shall be dedicated to and held in trust for the members and for the purposes as described in chapters 104, 287, 476, RSMo, and no other.” Section 104.440.1, RSMo.
   
   
3. Members must avoid conflict of interest with respect to their fiduciary responsibility.
   

1. There will be no self-dealing or business by a member and the organization. No trustee or employee of the System shall receive any gain, political contribution, or profit from any funds or transaction of the System, except benefits from interest in investments common to all members, if entitled thereto.
   
   
2. When the Board is to decide upon an issue, about which a member has an unavoidable conflict of interest, that member shall disclose the conflict to the Board and absent herself or himself from not only the vote, but also from the deliberation.
   
   
3. Board members will not use their Board position to obtain employment in the organization for themselves, family members, or close associates. Except by the unanimous vote of the Board, no person who has served as a Trustee of the Board may become an employee of the System until four years have expired between the date of his or her resignation, termination, or other removal as Trustee and the date of his or her appointment as an employee of the System.
   
   
4. Any trustee or employee accepting any gratuity, political contribution, or compensation for the purpose of influencing his action with respect to the investment of the funds of the System shall thereby forfeit his office and in addition thereto be subject to the penalties prescribed for bribery.
   
   
5. If a former Board member or employee of the system is employed by a current system service provider, it shall not impact the Board’s business relationship with that firm provided no conflict of interest exists and no violation of law occurs as a result of such employment.

4. Board members may not attempt to exercise individual authority over the organization except as explicitly set forth in Board policies.

1. Members interaction with the Executive Director or staff must recognize the lack of authority vested in individuals, except when explicitly Board authorized.
   
   
2. Members interaction with public, press, or other entities must recognize the same limitation and the inability of any Board member to speak for the Board, except to repeat explicitly stated Board decisions.
   
   
3. Members will not make individual judgments of Executive Director or staff performance.
   
   
4. Board members will not advise System members or beneficiaries regarding individual benefit amounts.
   
   

5. Members will respect the confidentiality appropriate to issues of a sensitive nature.
   
   
6. Members will be properly prepared for Board deliberation.

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Board Committee Principles

Board committees, when used, will be assigned so as to reinforce the wholeness of the Board’s job and so as never to interfere with delegation from Board to Executive Director.

Accordingly:

1. Board committees are to help the Board do its job, not to help or advise the staff. Committees ordinarily will assist the Board by preparing policy alternatives and implications for Board deliberation. In keeping with the Board’s broader focus, Board committees will normally not have direct dealings with current staff operations.
   
   
2. Board committees may not speak or act for the Board, except when formally given such authority for specific and time-limited purposes. Expectations and authority will be carefully stated in order not to conflict with authority delegated to the Executive Director.
   
   
3. Board committees cannot exercise authority over staff. Because the Executive Director works for the full Board, he or she will not be required to obtain approval of a Board committee before an executive action.
   
   
4. Board committees are to avoid over-identification with organizational parts rather than the whole. Therefore, a Board committee which has helped the Board create policy on some topic will not be used to monitor organizational performance on that same subject.
   
   
5. This policy applies to any group, which is formed by Board action, whether or not it is called a committee and regardless whether the group includes Board members. It does not apply to committees formed under the authority of the Executive Director.

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Board Committee Structure

A committee is a Board committee only if its existence and charge come from the Board, regardless of whether Board members sit on the committee. The only Board committees are those which are set forth in this policy. Unless otherwise stated, a committee ceases to exist as soon as its task is complete.

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Cost of Governance

Because poor governance costs more than learning to govern well, the Board will invest in its governance capacity.

Accordingly:

1. Board skills, methods, and supports will be sufficient to assure governing with excellence.
   
   
1. i. Retirement boards have a clear and ongoing need for information on how best to manage their operations, exercise their investment functions, and generally carry out their fiduciary responsibilities. Adoption of best practices is an effective way to assure that the board is operating in accordance to fiduciary duty. In light of the constantly changing nature of pensions, ongoing education is necessary to maintain up-to-date knowledge of investment strategies and governance practices, and education is the most effective way to achieve change. In connection with Section 105.666, RSMo, the board has established the following as its board member education program in effect beginning on and after January 1, 2008:
   
   
   1. Within ninety days of assuming the position of MOSERS trustee, new board members will meet with the executive director, the deputy executive director of investments, and the deputy executive director of operations. In addition, new board members will also meet with the chief legal counsel and the chief auditor. During those meetings, new board members will be oriented on all of the items described in the curriculum required under Section 105.666, RSMo. Board members will also receive trustee orientation material and website information that describe, in detail, all aspects of the administration of MOSERS.
   2. A board member who has served one or more years, shall be in compliance with the annual requirement under Section 105.666, RSMo, (which is to attend two continuing education programs beginning in 2008) if the board member attends at least two of the following each calendar year:
      • MOSERS annual board retreat
      • The Missouri Association of Public Employees’ Retirement System (MAPERS) annual education conference - usually held in July
      • The National Association of State Retirement Administrators (NASRA) annual conference - usually held in August
      • A MOSERS due diligence visit with a money manager, consultant, or other service provider (a schedule of due diligence meetings is available on the board’s website)
      • Any other conference designed to educate public pension administrators and trustees
   3. Any board member who anticipates not being in compliance with paragraph 2 of this policy shall notify the board chairperson. The chairperson in turn, in consultation with the executive director, will assist the board member in arranging for the activity required to achieve compliance. If the chairperson anticipates not being in compliance with paragraph 2 of this policy, the chairperson shall consult with the executive director who will assist the chairperson in arranging for the activity required to achieve compliance.
      
      
2. Outside monitoring assistance will be arranged so the Board can exercise confident control over organizational performance. This includes, but is not limited to, financial audits.
   
   
3. Outreach mechanisms will be used, as needed, to ensure the Board’s ability to listen to member viewpoints and values.
   
   
2. Costs will be prudently incurred, though not at the expense of endangering the development and maintenance of superior capability. The budget shall annually include adequate amounts for (a) Board training, including attendance at conferences and workshops, (b) audit and other third-party monitoring of organizational performance, and (c) surveys, focus groups, opinion analyses, and meeting costs. With regard to costs associated with Board education, the Board places great value on each Board member obtaining education on all aspects of system administration. The Board also considers participation by Board members in regularly scheduled site visits of investment managers to be a form of education. The Board recognizes that members will be required to travel to meet the Board’s expectation in this regard. Therefore, Board members are encouraged and authorized to travel for this and other educational purposes. The Executive Director shall continue to provide information to all members with regard to educational opportunities. The Board secretary shall maintain a log of all trips taken by Board members based on the travel arrangements made by staff. The log shall be made available to any Board member upon request.

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