Above par

But present these findings to John Poos, global director of pensions and benefits for George Weston Ltd. in Toronto, and he’d probably say that even if an individual’s golf game can’t predict corporate performance, his own game could offer insights into how he deals competitively with challenges.

“If I’m on the golf course, I see where I want to go. I look for what’s in my way and start to envision how to get to the hole. Can I get that ball over that tree?” Poos says.

“In the pension world, I’ll have a vision of what I want to achieve. Pensions are about trying to understand the outcome and looking for things that are getting in the way of the outcome. What can I do to resolve those things and make it achievable?” This pattern of vision—questioning and removing roadblocks—is a paradox that runs through Poos’ professional life and that has highly influenced his career. The approach regularly leads him to refuse to compromise with the status quo and come up with creative ideas that improve existing practices. From Stelco to Nortel, OMERS and finally George Weston, Poos has always avoided the easy shots.

Steel Town
Golf wasn’t his passion when he started in the business, but Poos’ love for the game and its contemporary relevance harks back to when he started out at Stelco, the Hamilton-based steel operation, in the late ’90s. Back then, every law firm, every investment management firm, every custodian and every consultant had its own golf event. If you did the basic math, you could, in the course of the summer, play golf almost 130 days a year if you accepted every invitation, says Poos. “Now that has all gone away. And for good reason, because it really wasn’t justified.”

Stelco is also where Poos made the transition to the pensions industry in the late ’90s, where he unintentionally evolved from running the legal department into managing the pension plan. A chief financial officer who asked him to take on the pension said, “Don’t worry. It’s only going to take about 10% of your time, and it’s like watching paint dry.” Turned out, that was far from an accurate job description.

At the time, in 1996, Stelco’s DB pension plan was in serious trouble. A troubled steel industry, demographic realities, very generous benefits and a stiff union environment had the pension barrelling toward a $1.3-billion shortfall that would soon put considerable financial pressure on the company. In 1997, Poos came up with a radical idea: close the DB plan to new salaried employees. “The outcome I wanted was to reduce the cost of managing a DB plan. It was such a big financial drain to the company. So I thought, why can’t we get this organization to a defined contribution plan?” he says.

He reached out to Elizabeth Brown, a partner at Hicks Morley in Toronto, for legal input. “Nowadays, everyone knows you can close a DB plan,” says Brown. “But in the 1990s, that was not very common. When he asked for a legal opinion, my first thought was, no one does that. But then I did the legal work and it was permissible. I was taken aback a bit. I hadn’t thought about it before. It was quite visionary.”

So Poos closed the DB plan and implemented a DC plan for new salaried hires. “Having a symbolic freezing of the salary plan would help in negotiations with the union to influence for more change,” he says. In some ways, it did help. Ultimately, Stelco was able to agree with the unions for wage, pension and benefits concessions to help cut labour costs by 20%. Despite these efforts, the realities of a weak steel market caught up with Stelco, and, by 2004, the company filed for bankruptcy protection. It spent the next two years in a restructuring process.

In the fallout, Poos faced a shakeup of his own. In 2004, he left Stelco and practising law behind, intentionally choosing a career in pensions to feed his insatiable appetite for challenge. He landed at Nortel as the director of global pensions. This was a role that implied no small amount of sacrifice. Industry peer Terri Troy, CEO of the Halifax Regional Municipality Pension Plan, said, “He went from the frying pan into the fire.”

Tech Trouble
It was no secret in 2004 that Nortel faced enormous difficulties stemming from poor business decisions during the early 2000 tech bubble and allegedly fraudulent accounting and reporting that all contributed to bankruptcy. In the years since, there have been lawsuits involving the pension plan, some of which are still before the courts. But before bankruptcy became a reality, Poos had set his focus on creating a different type of pension arrangement to give members a greater chance at saving for retirement by reducing fees.

“I wanted to merge the DB and DC plans,” says Poos. At the time, Western University had created a similar structure from scratch, but Poos wanted to restructure the existing plans into something new.

The DB plan had about $3.5 billion and the DC plan about $500 million. There were managers, fees and governance structures for both. “I asked, Why all the difference? DB governance in its current form is completely acceptable for all fiduciaries. If the managers we’ve hired for our DB plan are good enough, why are they not good enough for the DC plan? Wouldn’t we get fee savings if we combined the two? Wouldn’t we get economies of scale? Wouldn’t the governance be simpler if it was an all-in-one structure?”

Poos sketched out his idea. Imagine this: a number of asset allocation buckets—such as Canadian equities, global equities, bonds and alternatives— depicted in boxes on a napkin. To the left of it, Poos drew small circles for the DB asset categories available to members and, to the right, the DC asset categories. He then drew arrows from each of these circles to the buckets in the centre. The idea was to combine the assets from both plans and then have plan members buy into the asset buckets instead of putting them into the DB plan or having them pick DC-style products. The approach would take advantage of economies of scale to give plan members access to professional investment managers while reducing fees—as much as 100 basis points—and allow them to save more for their retirement.

“I ran to Joyce Stephenson, who worked there and also sat on the tribunal of the Financial Services Commission, and showed her a sketch of my idea. I asked, ‘What if?’ She thought it was great. After that, my drawings became real. When I brought it to the board a few members said, ‘Why hasn’t anyone thought of this before?’”

The idea needed a large amount of assets to work, and Nortel was big enough to pull it off. But it was going to take serious work. Poos called in Janet Rabovsky, director of investment consulting services at Towers Watson (Nortel’s investment consultant), and again turned to Brown for legal counsel, and invited a few others to collaborate on the project. It took a year to put the structures in place to allow Nortel to combine all the assets and managers. By 2009, Poos was set to deliver a DC plan that was cheaper to manage with simpler governance and where plan members could choose from in-house funds designed specifically for Nortel employees around the asset allocation buckets. “Two days before I was set to announce the new structure, Nortel went bankrupt,” says Poos.

The launch failure of the new DC structure left Poos frustrated that he couldn’t reach his goal. But he was most disappointed for members who didn’t get an opportunity to benefit from the new idea and also for the industry peers he worked on it with. “I was disappointed for all of the people I had developed relationships with and had roped in to assisting on this project. They just thought it was such a creative project and they would learn so much that they were prepared to commit to it. I wouldn’t trade my Nortel experience for anything, but it was very frustrating not to finish the job.”

Public Plan
After Nortel went bankrupt, Poos found jobs for his staff before launching his own job hunt. After a promising position in Nova Scotia fell through, he set his sights on the executive director’s role at OMERS Sponsors Corp. A colleague forewarned that the role would be like “herding cats” and to stay away from “the most dysfunctional board in the province.” Poos was sold. “Saying that to me is like throwing a red flag in front of a bull,” he says. After countless hours of interviews, a half-day psychiatric evaluation, a presentation on his first 100 days and more than 14 reference checks, he took the job.

OMERS represents employer, employee and retiree members of the OMERS pension plans. Poos was eager to learn how a jointly sponsored plan worked and wanted to figure out solutions to help its board make difficult decisions. When he first started, the board could barely agree on where to go for lunch, and benefits reductions were absolutely off the table.

“Over the course of two years, we went from not making any decisions to getting a three-year funding agreement with benefits reductions included, as well as a strategic plan that would outline how benefits reductions and contributions would be handled in the future,” says Poos. The plan, the Statements of Plan Design Objectives and Strategy, describes what happens to the plan funding under certain circumstances. For example, in years when the plan is overfunded, the excess contributions will be split evenly between contribution reductions and benefits increases. Benefits increases will take the form of reinstating any benefits reductions that were stated to be “temporary” during a deficit management period.

But after achieving a funding plan for OMERS, Poos was bored—a self-professed weakness. A hankering for an investment challenge led him back to the private sector to another of Canada’s largest organizations, George Weston Ltd., in November of 2011.

Back Nine
In spite of years of experience and the gravitas to get the job done, Poos didn’t fully appreciate the challenge until he got there. “It is the most complicated situation I’ve ever seen,” he says, describing the company’s benefits as a victim of rapid growth where pieces have been “bolted on” without a real strategic direction for the future. It hits at one of his pet peeves in pensions and benefits: leakage. “I hate spending money on things that don’t need to be complicated. So how do we reduce fees, stop the leakage and make things simpler? That’s the challenge at Weston.”

As part of his role at Weston, Poos serves as a trustee on the board of the Canadian Commercial Workers Industry Pension Plan (CCWIPP), Canada’s largest private sector multi-employer plan with about $1.8 billion in assets, where the challenge is to address a plan where the union has a significant voice in the decision-making. Any decisions can only involve benefits and contributions, which could disappear if something isn’t done.

The only mechanism available to address it is contributions, says Poos, now setting up to make another interesting play. He has spent the past 18 months working with the board on a redesign.

“The last thing anyone wants is a plan that devolves into a windup situation where people are getting less than 100 cents on the dollar. That’s not where I want any of my members to be. The way to avoid that is not to be underfunded. The way to get there is to acknowledge that you’ve got a hill to climb, and to set out a program to climb it,” he says.

Sometime this summer, CCWIPP will announce major changes to its pension plan that should help solve its funding challenges and demonstrate to the industry that a new, sustainable structure for pensions is possible. Brown has complete confidence the new structure will be a success due to Poos’ drive to get this done. “He’s not afraid to make a decision and push forward. He’s a doer.”

As for his next goal, Poos is already lining up his next shot. “I want to deal with what happens to pension plans when they’re fully funded,” he says. “Other than sitting on a plan and managing it, is there a way to get rid of it? Once we get to the point where we’re overfunded again, then you can start to imagine there will be people interested in those assets. I want to get a plan fully funded, then get the liability off the organization’s books so it never has to worry about funding those plans again.”

Leigh Doyle is a freelance writer based in Toronto. leigh.doyle@gmail.com

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