Dorothy Rezabek to Board: Will you vote for future PBIs which will be EARNED only when total fund returns show a profit?

From Dorothy Rezabek, October 30, 2008
Subject: PBIs given to STRS Investment Associates

At its September, 2008 meeting, the STRS Retirement Board approved $6 million for PBIs (Performance-Based Incentives) to pay 87 investment associates for losing $6.5 billion Total Investment Assets for fiscal 2007-2008. Most of us understand that terrible economic times have, once again, contributed to these monumental STRS loses.

What I don't understand & ABSOLUTELY DO NOT AGREE WITH, is why our STRS Board PAID MILLIONS IN PBIs (Performanced-Based Incentives) to REWARD STRS investment associates for LOSING BILLIONS. Moreover, I totally resent the slick attempt to gloss over the total fund return of -5.44% by stating investments exceeded the NEGATIVE composite bench mark by +.35%. How can you justify paying millions of PBIs by saying that STRS investment associates lost a few billion LESS than whomever forms the benchmark? Since the "P" in PBI stands for PERFORMANCE, why did the STRS Board pay any incentives, much less pay $6 million for poor performance???!!! To add insult to injury, the October, 2008 STRS Newsletter stated that the $6 million PBI was 3.4 million LESS than what was budgeted. Was this slick wording designed to make us GRATEFUL that the Board didn't pay the even larger, budgeted incentives???!!!

The message seems to be, " Attention STRS Investment Associates: Don't be too concerned if your investments tank. You won't be paid as much, but you'll still get your PBIs. Don't worry about getting fired for poor investment performance. Unlike almost every business in the world, no matter how many billion your investments lose, you'll still get your PBIs. Rah! Rah!! Rah!!! "

Suppose I owned a bakery & promised my employees millions of extra dollars, at the end of the year, if they sold enough doughnuts to meet, or exceed, a pre-set increase in my profits.Then the bakery was hit by a tornado & tons of doughnuts were lost. No business owner, in their right mind, would feel obliged to pay the promised incentive on a giant lose. Like a popular song says,

"Nothin' from nothin' is nothin'..." The tornado, which was inherently devastating, was not made worse because COMMON SENSE dictated the owner not pay promised incentives on a lost product.

I hope you, as an STRS Board member, can explain why the Board recently AGAIN voted to pay millions of dollars in PBIs on billions of investment loses.

Can you act responsibly and assure us that you, as an STRS Board member, will never VOTE FOR any future PBIs that are based on investment loses?

Kindly assure us that you will help revise the budget wording to ABSOLUTELY state that all future PBI's will NEVER be given as undeserved rewards on investment loses.

Will you assure thousands of STRS members that you will only VOTE FOR future incentives based on positive investment profits? Can you assure us you'll try to persuade other STRS Board members to only VOTE for future PBIs which can only BE EARNED when "Total Fund Returns" show a profit?

I trust you will respond soon.

Sincerely,
Dorothy H. Rezabek, retired STRS member
Morrow, OH
[Addendum: In October of 2008 it was discovered that, in fact, STRS had lost 25 Billion dollars in the previous 10 months. This figure makes the 6 billion dollar loss pale by comparison.]