An “ill-advised decision” by state Treasurer Janet Cowell to take positions on two outside corporate boards led to a discussion Thursday by the boards of trustees of the state’s pension plans on enacting secondary employment restrictions on future treasurers.
“It’s in my opinion that there are no looming ethics breaches, but a difference of opinion, and an ill-advised decision” by Cowell, said Michael Mebane, a Teachers and State Employees Retirement System board member who also sits on the seven-member Investment Advisory Committee that helps steer state investment management. Cowell chairs both boards.
“I do feel that a strong stance and further action is required either through this board … the Investment Advisory Committee, or both,” said Mebane. “I certainly feel that the sole fiduciary obligation of the treasurer supersedes any other activities that the treasurer, whoever that might be, should engage in.”
What guidelines might be imposed remain to be seen. The retirement system’s staff will conduct a study and make a recommendation or offer alternatives at the boards’ October meeting. Cowell’s outside employment will not be affected, Mebane said.
Cowell is not the only Council of State member unencumbered from outside employment, a situation that has raised eyebrows due to the conflicts of interest that potentially poses.
“I was actually shocked to learn that the governor all the way down could have another job,” said John Anerella, a TSERS board member who also is on the Investment Advisory Committee. He said he knows of a state Insurance Commission member who sits on the board of a publicly traded insurance company.
Given the nature of the treasurer’s and governor’s office, “and a matter of fact any of the Council of State offices, getting paid to be on an outside board or getting paid for another job is probably not the best use of their time,” Anerella said.
Mark Stohlman, who was sworn in to the Local Governmental Employees Retirement System Board of Trustees at the start of the meeting, said he was stunned to learn there is no regulation of outside employment for the treasurer and other Council of State positions.
Noting that he had to disclose any conflicts of interest as part of Thursday’s formal agenda, and had a similar obligation while serving in municipal government, Stohlman said, “To me that overlying ethics responsibility that we all have is taught on day one.”
Mebane said Cowell would be “happy to work with us in establishing guidelines that can be implemented by future treasurers.” But she has raised a concern “there are other Council of State positions that should also be held to the same standard.”
Cowell, who earns $125,676 as state treasurer, blindsided system board members this year by joining the corporate boards of James River Group Holdings and ChannelAdvisor without consulting the board.
Mebane told Carolina Journal a state treasurer working for other entities “isn’t normal course of business,” and the board learned of her secondary employment only through media accounts.
Cowell is believed to be making $125,000 a year serving on the two outside boards, and $175,000 in restricted stock.
“Treasurer Cowell will leave this to the boards to explore the issue, and does not have any comment beyond her initial statement,” Brad Young, her press secretary, said of the outside jobs study.
In the earlier statement, Cowell said: “I vetted any opportunities with the state Ethics Commission, and voluntarily recused myself from any potential decision-making that involved these companies, neither of which are in the state pension funds.”
Dan Blue III, a Democrat running for Cowell’s seat, agreed with the thrust of the boards’ conclusions, adding “the state treasurer should not serve on corporate boards or receive outside compensation as part of another job, and that the subject warrants further review for consistency across state government.” Cowell is not seeking a third term.
“I believe that when you have the responsibility for $90 billion worth of public workers’ pension money that 100 percent of your loyalty and energy needs to be devoted to the participants of the plan,” said Dale Folwell, the Republican nominee for state treasurer.
“In terms of this particular situation, I don’t need a law to tell me right from wrong,” Folwell said. “In all of my years of public service I’ve never accepted that form of compensation, nor will I ever as the next state treasurer.”
Folwell said Cowell’s decision brought “overwhelming negative reaction” from around the state, and in national and international media.
“I think that when we’re facing a $30 billion bankrupt state health plan, when we’re looking at a state pension plan that has not earned its required rate of return for the 15-year term just ended, that the problems are wider and deeper than just a discussion about sole fiduciary,” Folwell said.
Noting that Cowell did not attend Thursday’s meeting, when debate on placing secondary employment restraints on future treasurers took place, Folwell said, “I think her absence speaks for itself.”
“I’m a Republican. She’s a Democrat. I support her,” Mebane told CJ. “I thought she’s done a great job, but sometimes things override the good job that people are doing.”
He praised Cowell for establishing transparency in the governance committee, and said the investment management division was “extraordinarily professional with excellent top-down management … great asset allocations,” and an ability to respond to General Assembly mandates.
During the meeting, Mebane said retirement boards must be certain they represent members fully and effectively.
“Our members expect that we stand vigil guarding their interests every day as we serve them,” Mebane said. “I have often said that this board’s credibility on significant issues depends on how we deal with the small issues like supplemental employment.”