Dennis Leone: Statement on bonus policy; new plan an insult to retirees
From Dennis Leone, November 9, 2008
Subject: My Point -- Apples to Apples Question
To all -- Here is my point pertaining to the ever-present STRS argument that we are “saving” money by managing our stocks internally, and so therefore the investment staff deserves the big bonus checks they receive annually (whether or not STRS shows a positive stock market return):
Many decades ago, the STRS Board made a conscious decision to employ 85-120 investment staff members so stocks could be managed internally, efficiently, and under the careful watch of the board. A provision of ORC 3307.15 requires the board to be fiscally prudent and to “defray reasonable costs for administering the system.” Isn’t it true that this is what every school board also is supposed to do as well – be fiscally prudent, efficient, and cost-effective?
It has been a conscious decision by the STRS Board to manage stocks internally and give these investment staff members secure jobs, to provide them with handsome base salaries (many over $200,000), to give them nice base raises each year, to provide them with outstanding health insurance, prescription medication, dental insurance, wonderful college course reimbursements, generous cash-in options for both sick leave and vacation leave, and given them all a spectacular 14% annual contribution to their own pension system (PERS) for every dollar they earn. THE REASON THEY RECEIVE THESE THINGS IT THAT IT IS THEIR JOB TO INVEST OUR STOCKS INTERNALLY. IT IS WHAT THEY WERE HIRED TO DO. I simply do not accept someone telling me that because it would cost us more money to do something in a different way, that this is to translate into staff getting giant bonus checks because we are “saving” money. Excuse me, but it is STRS Board’s legal responsibility and ethical obligation to administer the pension system prudently, efficiently, and in a cost-effective way. Sometimes this means even laying people off (like STRS did a few months ago when 8 staff members from the IT Dept were laid off) and sometime it means having plans and policies in place to operate the system in a less costly fashion. I don’t recall that after the STRS Board approved the lay-off of 8 IT Dept staff members that we divided up their salaries among the rest because we were “saving” money by not employing them anymore.
Where does it say in ORC 3307.15 that after the board is fiscally prudent and defrays costs for administering the pension system that we are then expected to give investment staff members big bonuses for doing their jobs? Is STRS “saving” money because we now have travel policies in place to control wasteful spending on trips? Are we “saving” money because we scaled back some of the ridiculous fringe benefits that the STRTS staff never should have had in the first place? Are we “saving” money because pension money is no longer being used for booze, parties and entertainment? Are we “saving” money because we do not allow staff members to fly first class to meetings and because they now have to turn in receipts for meals? My answer is a big NO to all of the above, because – at least in my eyes -- the board is to be a CARETAKER of pension money.
Perhaps I need to call the Chillicothe Board of Education and tell them I deserve a bonus checks for each of the seven years I served as supt. I mean, after all, I chose not to recommend that the board hire 2 or 3 more assistant supts and since I did the work that such 2 or 3 additional assistant supts would do, this must mean that I “saved” the school board money and therefore I deserve a bonus. Wouldn’t it always cost our school boards more to do things in different ways? In fact, I think John Lazares and I should ask the STRS Board for a bonus for the “savings” we created because neither of us spent pension money on expensive out-of-state investment seminars.
My fellow board members have been sucked into the notion that we are “saving” money by not doing things differently. There is a big difference between “saving” money and simply not spending it……..which, according to ORC 3307.15 is part of the board’s governance function.
I wish to repeat -- notwithstanding all I have said above-- that I support bonus checks for the STRS investment staff when we experience positive returns. I cannot, however, support them after we have dropped $25 billion in 12 months, which is 31.25% of everything STRS has. Most don’t yet realize that the board went ahead this past March and adopted (8-1) a NEW investment staff bonus package for fiscal year 2009 (which began July 1, 2008) – even though we had just dropped $8 billion in the previous 4 months, and even though the board had no idea how much more we would drop in the final 4 months of fiscal year 2008. It was utterly wrong for the board to adopt a new bonus plan this past March. In fact, it was an insult to all retirees, in my eyes.
The above are my opinions alone and do not represent the STRS Board.
Dennis Leone
Subject: My Point -- Apples to Apples Question
To all -- Here is my point pertaining to the ever-present STRS argument that we are “saving” money by managing our stocks internally, and so therefore the investment staff deserves the big bonus checks they receive annually (whether or not STRS shows a positive stock market return):
Many decades ago, the STRS Board made a conscious decision to employ 85-120 investment staff members so stocks could be managed internally, efficiently, and under the careful watch of the board. A provision of ORC 3307.15 requires the board to be fiscally prudent and to “defray reasonable costs for administering the system.” Isn’t it true that this is what every school board also is supposed to do as well – be fiscally prudent, efficient, and cost-effective?
It has been a conscious decision by the STRS Board to manage stocks internally and give these investment staff members secure jobs, to provide them with handsome base salaries (many over $200,000), to give them nice base raises each year, to provide them with outstanding health insurance, prescription medication, dental insurance, wonderful college course reimbursements, generous cash-in options for both sick leave and vacation leave, and given them all a spectacular 14% annual contribution to their own pension system (PERS) for every dollar they earn. THE REASON THEY RECEIVE THESE THINGS IT THAT IT IS THEIR JOB TO INVEST OUR STOCKS INTERNALLY. IT IS WHAT THEY WERE HIRED TO DO. I simply do not accept someone telling me that because it would cost us more money to do something in a different way, that this is to translate into staff getting giant bonus checks because we are “saving” money. Excuse me, but it is STRS Board’s legal responsibility and ethical obligation to administer the pension system prudently, efficiently, and in a cost-effective way. Sometimes this means even laying people off (like STRS did a few months ago when 8 staff members from the IT Dept were laid off) and sometime it means having plans and policies in place to operate the system in a less costly fashion. I don’t recall that after the STRS Board approved the lay-off of 8 IT Dept staff members that we divided up their salaries among the rest because we were “saving” money by not employing them anymore.
Where does it say in ORC 3307.15 that after the board is fiscally prudent and defrays costs for administering the pension system that we are then expected to give investment staff members big bonuses for doing their jobs? Is STRS “saving” money because we now have travel policies in place to control wasteful spending on trips? Are we “saving” money because we scaled back some of the ridiculous fringe benefits that the STRTS staff never should have had in the first place? Are we “saving” money because pension money is no longer being used for booze, parties and entertainment? Are we “saving” money because we do not allow staff members to fly first class to meetings and because they now have to turn in receipts for meals? My answer is a big NO to all of the above, because – at least in my eyes -- the board is to be a CARETAKER of pension money.
Perhaps I need to call the Chillicothe Board of Education and tell them I deserve a bonus checks for each of the seven years I served as supt. I mean, after all, I chose not to recommend that the board hire 2 or 3 more assistant supts and since I did the work that such 2 or 3 additional assistant supts would do, this must mean that I “saved” the school board money and therefore I deserve a bonus. Wouldn’t it always cost our school boards more to do things in different ways? In fact, I think John Lazares and I should ask the STRS Board for a bonus for the “savings” we created because neither of us spent pension money on expensive out-of-state investment seminars.
My fellow board members have been sucked into the notion that we are “saving” money by not doing things differently. There is a big difference between “saving” money and simply not spending it……..which, according to ORC 3307.15 is part of the board’s governance function.
I wish to repeat -- notwithstanding all I have said above-- that I support bonus checks for the STRS investment staff when we experience positive returns. I cannot, however, support them after we have dropped $25 billion in 12 months, which is 31.25% of everything STRS has. Most don’t yet realize that the board went ahead this past March and adopted (8-1) a NEW investment staff bonus package for fiscal year 2009 (which began July 1, 2008) – even though we had just dropped $8 billion in the previous 4 months, and even though the board had no idea how much more we would drop in the final 4 months of fiscal year 2008. It was utterly wrong for the board to adopt a new bonus plan this past March. In fact, it was an insult to all retirees, in my eyes.
The above are my opinions alone and do not represent the STRS Board.
Dennis Leone
Labels: bonuses, Dennis Leone, STRS, STRS Board
posted by Kathie Bracy at 11:27 AM
<< Home