UC Regents Stall in Bid to Oust Treasurer

Here’s the dilemma facing the UC Board of Regents: Some regents want to get rid of an employee, but the employee--although headstrong and difficult in the eyes of her critics--has done a terrific job by most objective measures.

That thorny management problem surfaced Monday when the regents hastily held a meeting via telephone conference call that had been publicly billed as a session to handle the resignation of UC Treasurer Patricia A. Small. The regents were set to give her the title of treasurer emeritus and finalize a buyout package to provide a slow, graceful exit.

But after meeting in secret for an hour, the regents flung open the doors to announce that there was no deal. Or as the Board of Regents Chairwoman S. Sue Johnson put it: “There remain some details to be worked out.”

Some of those details are that Small is proud of her 29 years of faithful service to the University of California, the last four as the university’s treasurer.

In that job, which pays $273,600 a year, she manages the university’s $52.9-billion investment portfolio. And she has done so with considerable success.

Small couldn’t be reached for comment Monday. But as she has pointed out earlier, the $37.9-billion pension fund has averaged 21.3% return over the past four years. It has been growing so fast that employees have not had to contribute at all to their retirement fund for a decade.

So the 54-year-old treasurer, sources said, balked at the idea that she would work on “special projects” for newly hired Senior Vice President Joseph Mullinix for the next three years as she edges closer to retirement.

Instead, she wanted to continue to help manage the university’s investments, according to UC sources. Before becoming treasurer in 1996, Small was No. 2 in the treasurer’s office for 15 years.

But some regents have grown uneasy at Small’s resistance to their increasing interest in how the university’s money is managed.

“I am laudatory of the treasurer and what she has done for the pension fund and its returns,” said Judith Hopkinson, chairwoman of the regents’ investment committee. “But the regents have a responsibility of some oversight and that’s what we are doing.”

For years, the UC regents showed little interest in the treasurer’s office. In 1998, however, Regent Gerald Parsky, a Los Angeles financier, took over the investment committee and began to scrutinize UC’s portfolio, which includes the university’s $5.2-billion endowment.

The regents brought in an outside consultant, Wilshire Associates, to review UC’s investment policies.

As part of the overall review, the regents decided that the portfolio was too risky with 63% of the funds in high-growth stocks, which can be more volatile than other investments. The regents have now set a limit of 53% of the portfolio in such equities.

Small bristled at the intrusions, regents said, partly because she was long used to acting independently. Until recently, the treasurer’s office reported only to the regents and was independent from systemwide administration that oversees the nine UC campuses.

But last month, the regents placed the treasurer’s office under the oversight of UC President Richard C. Atkinson. Atkinson had made the regents nervous in the past couple of years by repeatedly warning them that he had no control over the treasurer’s office and implying that he should be held harmless were anything to go awry.

By all accounts, the university’s pension fund and endowment are in a strong financial position. But a number of regents, who spoke on condition of anonymity, said they want to make sure the funds are managed by someone who could help the university weather stormy financial markets in the future.

All this has troubled some of Small’s friends in the investment world, who suggests that politics is playing a part in the discussion--a suggestion that regents deny.

“It doesn’t make much sense that they are trying to get rid of her,” said Arnold H. Weiss, general counsel of Emerging Markets Partnerships. “If you compare her record to anyone else’s, she has done extremely well. She is one of the best money managers I know.”