The board overseeing Wisconsin's pension fund will discuss whether it needs to make changes in the way it hires highly paid executives after state auditors found the agency gave preferential treatment to candidates who previously worked with the agency's then-executive director.
The Legislative Audit Bureau looked at five hires at the State of Wisconsin Investment Board, or SWIB, over three months in early 2018 and compared them to five hires in 2017. As a state agency, SWIB is bound by state civil service law requiring an open and objective process for hiring.
Three of the 2018 hires were for "newly created senior positions," according to the LAB, and while auditors "do not question whether the five employees SWIB hired in 2018 met the qualifications established in the publicly posted positions, it is difficult to conclude that SWIB equally considered all qualified applicants for the five 2018 recruitments we reviewed."
The salaries for the five range from $125,000 to $310,000, and four of the five previously worked with former executive director Rick Smirl at the Chicago-based William Blair Investment Management. Smirl began at SWIB in late January 2018 at a base salary of $400,000. He resigned after six months, taking a job as chief operating officer at Russell Investments.
One of the five, recruiting director Victoria Tucker, lacks a college degree, although the posting for her job says the "ideal candidate" will have one.
SWIB spokeswoman Vicki Hearing said a degree was not a "requirement" for the job and that Tucker "has spent her entire 25-year career in the investment management industry, including 15 years of direct recruiting experience for premier asset manager organizations."
"In every instance, all qualified applicants were considered and SWIB hired the most qualified candidates," Hearing said in an email. "Two of the hires were also former colleagues of David Villa, SWIB’s now executive director/chief investment officer. Having staff refer promising candidates, then vetting those candidates against the entire applicant pool is a highly successful method of using employee networks to find the people with the right skills."
According to the audit:
- Between 11 and 61 people applied for each of the five positions, but the only person who received an in-person interview was the one hired, and "SWIB lacked documentation in its hiring files sufficient to explain why no other applicants in four of the five recruitments were selected for in-person interviews." Hearing said "SWIB interviewed by phone or in person other candidates for two of the five positions."
- SWIB staff showed preference for the people who were ultimately hired before their positions were posted. "In one instance, an applicant emailed a SWIB staff member 17 days in advance of the public announcement of the position stating, 'I had a brief discussion with (the executive director) after we met on Saturday and he said that he would use one of his approved positions to bring me on board and that we could fine tune my role subsequently.'"
- It took half as much time or less to hire the five than it took to hire the five comparables in 2017. "Further, although the position was posted for 13 days for one recruitment, available information indicated the date the job was posted was the same date the applicant who was ultimately hired submitted an application and was also interviewed."
In his response to the audit, current SWIB executive director David Villa said the board "hires for very specialized positions and the necessary skills often require significant investment industry experience."
"Because of Rick Smirl’s network, SWIB was able to recruit experienced people that we would not have had access to prior to his arrival," Hearing said. "Rick also suggested other candidates in his network for SWIB positions in 2018, but SWIB declined to pursue or hire those candidates because SWIB determined other applicants were better qualified."
He and Hearing said SWIB has taken steps to better document its hiring processes.
SWIB's board of trustees will meet March 12 and 13, when it "will review LAB’s recommendations regarding its Recruiting Philosophy (i.e. the hiring policy referred to by LAB)," Hearing said in an email.
SWIB is responsible for managing more than $100 billion in Wisconsin Retirement System funds on behalf of more than 632,000 current and former state employees. It is one of only a handful of fully funded or near-fully funded state pension funds in the United States.
December's audit of SWIB's hiring practices was spurred by a report to the LAB's Fraud, Waste and Mismanagement Hotline.