The Domino Theory, Orchestra Pension Style

The 12/1/2011 edition of the New York Times published an article by Dan Wakin and Mary Williams Walsh that examined the impact of the Philadelphia Orchestra’s (POA) withdrawal from the American Federation of Musicians and Employers Pension Fund (AFM-EPF). In case you’re coming into the situation without much knowledge, here are the highlights you need to get up to speed.

1. Under the guise of bankruptcy and a recently ratified collective bargaining agreement with its musicians, the POA was granted permission to withdraw from the AFM-EPF.
2. Per that ruling, the AFM-EPF has pledged to collect up to $35 million from the POA in what it asserts the orchestra owes the fund.
3. Currently, the POA and AFM-EPF are engaged in a legal dispute in order to settle the matter.

What’s important to note in this situation is the AFM-EPF is a fund comprised of numerous sources from orchestras of varying budget size to media oriented employers (recording, video games, film, etc.) that cumulatively oversee pensions for approximately 50,000 members.

Within this system, the POA was clearly one of the largest budget organizations involved in the fund and if they fail to make good on what the fund claims it owes, that means the remaining members become responsible for picking up the slack by means of increased contributions.

What makes the article unique is it includes a quote from the CEO of an orchestra which is also part of the fund; in particular, the Los Angeles Philharmonic. The CEO in question is none other than Deborah Borda, who had nothing but sharp tinged words about the POA’s position in all of this.

“It’s an abrogation of responsibility.

For those on the outside looking in, that might not seem like much but in this field, it’s tantamount to throwing down the gauntlet and demanding satisfaction. Simply put, it isn’t common for one CEO to speak out in a public format such as the New York Times against a peer and according to the article, the POA’s president and chief executive, Allison Vulgamore, responded in kind.

“The Philadelphia Orchestra is managing its own situation with choices that are available to it,” [Vulgamore] said. “I would not say that anything that is happening translates to other orchestras. I wouldn’t be so presumptuous.”

Perhaps unsurprisingly, Vulgamore doesn’t think the POA’s actions will have any adverse impact on other orchestras which are still fund members whereas Borda sees the actions as shirking accountability and making other orchestras pay for POA mistakes. According to the article, fund board member and retired musician, William Moriarty, sums up the outcome in black and white language.

“The more employers that withdraw, the worse it is for the fund.”

To that end, it becomes clear that one of the real issues here is whether the POA’s actions will have any sort of Domino Effect, ending with the collapse of the AFM-EPF. If boards at other member employers see the legal system allowing the POA out of the fund without penalty then it could trigger a mad dash of orchestras looking to get out in a sort of pension dodging reverse musical chairs.

Even if that worst case scenario doesn’t transpire, don’t think that actions by orchestras, especially the larger budget groups, aren’t interconnected. Just watch what might happen if Borda, Vulgamore, or both decide that outrages will not be suffered.

Don’t expect pistols at dawn, that’s too dramatic for a comparatively collegial field but don’t be surprised if either group decides to press the boundaries of existing competitive junctures (chasing Foundation support, corporate donors, gobbling up guest artists for the most profitable dates, stealing top administrative and artistic talent, etc.).

In the meantime, what do you think? Assuming the AFM-EPF does not recover the funds they are seeking from the POA, what sort of impact will their leaving the fund have on remaining member orchestras? Is there any real potential for a Domino Effect?