Where’s the leadership at MTA?

During a recent discussion with an MTA board member, he indicated there are lots of misconceptions out there regarding MTA. I assumed “out there” meant you and me, the owners of MTA.

I asked how those misconceptions could be cleared up. He said he didn’t know. I suggested that perhaps MTA could do what the Mat-Su Borough and several local cities do and have the board meeting agenda published in the newspaper. That way, the owners would have an opportunity to review what is going to be discussed at the next board meeting and can decide whether they want to attend or not. This might help clear up some of the misconceptions and display a more open and transparent board operation.

He said that is a possibility. One of the characteristics of good governance under the policy governance mode (PGM) is transparency and keeping in touch with the owners. So, I waited and watched the newspaper to see if that suggestion was approved or if some other steps were taken to inform the owners of the board’s activities. Nothing appeared in the local paper.

I then formally requested copies of the board minutes for the last six board meetings to better understand what business the board was addressing and what action they took on those items. I received faxed copies of minutes starting with March 16. That board meeting lasted about 1 hour, 40 minutes with the bulk of the time spent on the petition for a bylaw amendment regarding release of the general manager’s salary and benefits package. The board’s final decision was to recommend to the owners that they vote “no” to the change in the bylaws.

As you may recall at this year’s annual meeting, the owners approved the bylaw change in question. The PGM was adopted by our board some time ago and is heralded by several board members as being the best thing to happen to the board. The PGM is not designed to please board members or the general manager. It is designed to give organizations (like MTA) true owner-competent servant-leaders to govern on their behalf. Essentially, the board is the voice of the owners. The bylaw vote is another example of how out of touch the board is with the owners who elected them as their representatives.

Also at the March 16 meeting, the board unanimously approved the motion “to authorize Milliman to update the CEO Compensation Study done in 2009.” Milliman Inc. is headquartered in Seattle with offices all over the world. According to its website, the company is “among the world’s largest independent actuarial and consulting firms.” Further review indicates that its “Pension Funding Study, published annually, and Pension Funding Index, published monthly, are industry standards for pension funding.”

I find it interesting that our board is paying who knows how much money to an outside firm to update the CEO Compensation Study (to assist in determining how much more money to pay our general manager) when the same company has considerable expertise in pension funding. Perhaps if it had Milliman review MTA’s pension issues back in 2009, versus general manager compensation, some of the pension issues at MTA may have been solved.

In the April 20 minutes I found an item titled “Update on DB (Defined Benefits) Pension Plan Liquidation Process.” The board attended a workshop the afternoon of the board meeting on the process and potential timing of liquidating the MTA Defined Benefit Pension Plan. The minutes stated that the intent of MTA management has been to liquidate the plan, placing the liquidation (time when the plan would be fully funded) around 2015.

I commend the board for taking steps to resolve MTA’s pension problems. My major concern is the timeline for completing this liquidation. Many of the current retirees, some of whom had worked for MTA from 20 to 30 years, had planned their retirements around the monthly income they were told they could expect upon retirement.

These same folks are now receiving about half that amount. The bottom line is that many of the current retirees (union and non-union) will have to wait until at least 2015 to receive the balance of their retirements. I understand there are many variables in types of retirement plans and how those plans are funded. I also recognize that the 2015 date is just a guess based on estimates of what may happen in the telecommunications industry and the investment market. However, the board has a responsibility to keep MTA fiscally sound and also has a moral responsibility to the retirees to make the old plan whole as soon as possible. Spending money on studies to determine how much to pay one individual (the general manager) does not meet either their responsibility.

Two items in the April 20 minutes also caught my attention: “CEO Monitoring Report on Communication and Support to Board” and “CEO Monitoring Report on Organizational Purpose.”

I can only assume the board has established goals in each of these categories as well as a clear method of evaluating success or failure. The board president explained, according to the minutes, that the CEO (general manager) prepared the monitoring report, the board reads his report and then, based on the information in his report, the board fills out an evaluation survey. The results of those surveys determine his compliance or noncompliance. In both cases the board unanimously affirmed and accepted the CEO’s monitoring reports with no comments or questions.

I find this process offensive. It’s like the fox guarding the hen house. How does the board have a clue as to what’s really going on within MTA if all the information comes from the one person being evaluated? Under this system, the general manager, in order to achieve an excellent performance evaluation (remember, this is how his compensation is determined), is in the position of potentially reporting only the positive issues. Board decisions need to be based on complete information. The board must require information from a variety of sources. Those sources include staff, owners, experts and associations to which MTA belongs.

The current board apparently requests no other source to check the information solely provided by the general manager. As a result, we have a rubber-stamp board and one unwilling or unable to adequately represent the best interests of the owners of MTA.

Also at the April 20 meeting, which lasted about three-and-a-half hours, the board spend all but about one hour of that in several executive sessions. The result of the executive sessions was to give compensation and bonus to the CEO as discussed in the executive sessions. No figures were given in the minutes.

The May 17 board meeting lasted just more than an hour with about half that time spent in executive session.

In the Aug. 17, meeting the board heard a report from its independent auditor, Moss Adams. Moss Adams is another outside firm with headquarters in Seattle. Its representative reviewed, among other things, product line revenues and expenses, assets and liabilities, and how MTA relates to other rural telcos. I find it interesting that when it comes to accounting issues, MTA is compared to other rural telephone companies. However, when it comes to determining compensation for general manager, the board did not want just rural telephone company salaries used because they would make MTA’s general manager’s salary too low.

Remember, the board requested Milliman Inc. to conduct a compensation analysis for MTA’s general manager. Its findings were presented in the July 20 board meeting. Because the board did not want MTA’s general manager’s compensation package compared with other rural telephone companies and believed his compensation should be compared with the general managers of large, investor-owned companies currently competing in MTA’s service area, the Milliman report indicated MTA’s general manager’s base salary is below market. Given the criteria presumably set by the board, this result comes as no surprise. This appears to be another poor financial decision on the part of our board.

All the minutes indicate that the general manager’s detailed written report was included in each board member’s board packet. There was no indication in the minutes what information was provided to the board and there was little or no discussion regarding his reports.

The PGM states that the governing board is the on-site voice of the owners. The current MTA board does not do a good job of representing the entire MTA service area as witnessed by the recent $300,000 commitment to the city of Palmer’s ice rink. Under the PGM, the board is accountable for what the general manager’s job is and that the general manager does the job well. The general manager is not accountable for what the board’s job is and that the board does its job well.

Unfortunately, what we have at MTA is just the reverse. The general manager tells the board what to talk about (provides the agenda), pulls the board together when there is a dissension (afternoon workshops and/or executive sessions) and orients new board members. Nowhere else in an organization are subordinates (the general manager) responsible for the conduct of the superiors (the board). At MTA, we have the board’s performance being the general manager’s responsibility, and that simply excuses and prolongs board irresponsibility. An MTA owner attending an MTA board meeting would have great difficulty figuring out the health and direction for the organization. The question we all should ask is: who is the leader — the board (our representatives) or the general manager (our employee)?

The board can go on and on about how great the PGM is working and how many Outside companies it commissions, and what a great job the general manager is doing by awarding him salary increases and bonuses. However, if all the subsidies paid to MTA today were to disappear, so will MTA. No amount of salary increase or bonus will change that.

Faye Palin lives in Wasilla and retired from MTA as a vice president of customer service.