Governance processes at $76 billion Alaska Permanent Fund Corporation (APFC), the Juneau-based sovereign wealth fund, have been under scrutiny ever since board members unexpectedly ousted former executive director Angela Rodell at the end of 2021. Now, as a probe of its policies continues, trustees have turned their focus to strengthening the processes around how they evaluate their new executive director. Deven Mitchell replaced Rodell as executive director in October 2022.
Although APFC trustees have an evaluation policy in place (for their executive director) it is complex and distinct from peer funds with a similar AUM, said governance experts from boutique advisory firm Funston Advisory Services. Funston has been mandated since February to oversee APFC’s governance practices and suggest recommendations in an iterative process that has included gathering governance documents and executive feedback from within APFC.
At funds with the most robust governance, executive director performance is measured relevant to set goals over a period of time. Trustees typically evaluate their executive director in terms of compliance with governing documents, gaging where the executive director is doing well and where there is a need for improvement.
Following meetings with the executive director for feedback and discussion, findings are published. In this example, oversight also includes a process whereby the executive director provides a self evaluation to the board.
Staff and trustee contact
APFC could also sharpen its governance around trustee contact with staff members outside board and committee meetings. Ideally, an executive director should always know the workload and requests for additional information generated by board members of staff. Every board member should be copied on requests for information from staff, working off a well-managed list.
Neglecting these types of processes risks undue influence and ethics violations via behind-the-scenes trustee contact with staff members about which other board members are unaware. Funston recommended a policy stipulating the logging of all information regarding contact and requests between staff and trustees.
Something that becomes increasingly important when it comes to referrals with service providers around investment opportunities, ensuring that regular standards of due diligence apply. This provides transparency to the board and ensures a level playing field, they said.
APFC’s governance could also benefit from an increased board member bench. APFC only has six trustees compared to an average of nine board members at peer funds. Having more board members would create more support for trustees around burgeoning workloads and also support succession planning. Trustees heard that expanding the size of the board is a chance to add different perspectives and skills.
Funston executives also counselled on the importance of having a majority of board members with investment expertise and discussed the value of term limits. A large minority of peer funds have term limits of two to three consecutive terms for board members in a strategy that strengthens independence.
APFC’s trustees include the Commissioner of Revenue and the head of another state government department. The other four trustees are public members, appointed by the governor, who serve four-year staggered terms, so one is replaced each year.
Board and committee member self-evaluation processes is another pillar of strong governance.
Typically, board evaluation involves a governance committee chair or external facilitator developing a questionnaire that elicits input and reactions from the board. Typical questions would include how well trustees think they set clear policy and direction, or how well they oversees due diligence and performance and use of board powers. An important element of the process involves the board ensuring that recommendations from the self-evaluation process are acted upon. Self-evaluation also helps highlight skills trustees need to develop and can be tied into educational programmes.
Funston also suggested APFC revisit its succession plan around executive director and CIO roles. Although the fund has an emergency succession plan, the advisory firm recommended it develop a long and short-term succession strategy. Moreover, although the CIO reports directly to the executive director, Funston suggested the executive director also confer with trustees in that CIO evaluation process, incorporating their input too.
Other high priority board recommendations included improving stakeholder communication and crisis management plans and developing clear and expanded compliance monitoring and reporting responsibilities.