Rich DeColibus to STRS Board: You're handling this as well as Nixon handled Watergate

From Rich DeColibus, October 24, 2008
Subject: PBI

Dear Gentle(wo)men:

I am a bit confused about the recent PBIs given to our STRS Ohio Investment associates. Perhaps you can enlighten me. According to your most recent newsletter ("STRS Ohio News", October 2008), the criteria for PBIs are (1) total investment fund performance, and (2) the individual goals over the previous year.

Being as we lost $25 billion over the last year, it seems fair to assume our overall investment strategy was not to lose $25 billion. Indeed, taking a wild guess, I would venture our overall strategy was actually to make money, not lose it. Unless we are somehow exuberant we didn't lose $35 billion, and only lost $25 billion, perhaps we need to be a little more optimistic in our expectations. I suppose if you set the bar low enough, even crippled ants will be able to crawl over it.

For the sake of argument, I will assume we really didn't want to lose money. This brings us to point number two: the other justification for PBIs totaling $6 million dollars was individuals meeting their goals. At this point, then, one of three things can be true. (A) Some individuals actually had the approved goal of losing money for the system; if this is the case, then, yes, they have met the PBI criteria. (B) Some individuals had positive approved goals and despite the general decline in the capital markets managed to actually make money for the system, again meriting PBIs. However, given the $6 million payout, either a very few of them got a lot of money, or this simply didn't happen because it's not possible for many to have ended up positive and still lose $25 billion. (C) The third possibility is few, if any, individuals made their goals but it didn't matter, they got PBIs anyway.

Actually, what bothered me the most were the second, third, and fourth paragraphs of the article in question, all of which amounted to justification of the unjustifiable. It was, in political terms, "spin", and my suspicion is most readers saw it that way. Most of the individuals I communicate with are not upset about losing $25 billion; they understand it's a paper loss and the lower the market, the better the opportunity for future gains. They are upset about the PBIs, and they are especially upset about the bogus justification. Look, you guys (gender inclusive) screwed up with these PBIs, and you're handling it as well as Richard Nixon handled Watergate.

Rich DeColibus