Ralph Roshong's speech to STRS Board, December 11, 2008

From Ralph Roshong, December 11, 2008
Subject: December STRS Board meeting

Friends, Just a note on the Board meeting today. I attended, first time in about 6 months. Guess what, nothing has changed. New Exec Dir but the same old tricks. If you can believe this, he unilaterally gave all employees the day off on Thanksgiving Friday. No Board approval. Cost, $175,000. Then I find out, he did what his predecessors did, continued the culture. I cannot fathom this. I gave them the below statement and paraphrased it to them verbally along with several comments.

Ralph Roshong
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Board Members of STRS: Mary Ann Quilter Cervantes, Mark H. Meuser, Jeff Chapman, Taiya L. Hayden, Dennis Leone, Tim Myers, Constance K. Ramser, Deborah Delisle, Craig C. Brooks, Exec. Dir. Michael J. Nehf

I am a retired member of STRS since 1991 and have attended numerous public meetings of the STRS Board over the last 4-6 years. I have been most appreciative of your allowing me to present comments to you along with hundreds of other retired and active STRS members. Most have expressed very passionate pleas to you concerning the Board’s actions and inactions over the past 10 years or so. Most of those pleas concerned inactions by the Board and were directed toward actions taken by the administrators of the STRS unilaterally and not questioned or monitored by the Board.

I would like to present to you a reminder that your responsibilities to the membership of STRS is of the utmost seriousness. I personally feel that over these past 10 years the oversight of the Board over the actions of the Executive Director have been seriously negligent. You have not always provided the oversight and questioning of the administrative team’s actions that is commensurate with your responsibilities.

You do not have to be reminded in detail of the financial catastrophes that are besetting the companies of this country. Most, if not all, have been the result of Board’s of Directors NOT exercising their responsibilities of monitoring the actions of their administrators in or of companies such as Lehman Bros., Bear Stearns, AIG, Freddie Mac, Fannie Mae, Citi Corp., etc. You are our Board of Directors, and I want to be assured that you will be diligent in exercising your fiscal duties of oversight.

You must question the operations and procedures of your administrators in depth as to what and why various actions have been taken or should be taken. If you do not feel qualified, interested, or willing to do this, then you should leave the Board as soon as possible and allow someone who is responsible to replace you. You must know and understand what the policies of compensation are and approve them for action by the administrators. You must be sure policies in place are well written, approved by you, and implemented as written. You must be aware of the details of large contracts with large price tags before they are implemented and hopefully approved by you prior to implementation. ASK THE DIFFICULT QUESTIONS of the administrators BEFORE an action is taken not after, and then the membership will not have to ask the difficult questions after the fact.

You have to address the bonus issue for our investment personnel. Bonuses should not be automatic. You pay salary consulting firms very large sums to tell you our staff is not paid competitively. Our staff can do that comparison themselves. Consultants are really paid to keep themselves in business by upping salaries everywhere and keep the race going upward. There is always someone in the last quartile but consultants move them up, others move to the lower quartile, and they then get them moved up. That’s their game. Milestones are probably set by our own staff or some other consultant and always in a range which will always generate a bonus. If you are going to pay bonuses, have the investment person justify to their supervisor why their performance should deserve a bonus and how much. Then the supervisor presents their recommendations to the Board, and the Board supports their judgments or asks for corrections. No set scales.

The Board still allows too many compensation determinations to be made by the Executive Director unilaterally without any discussion with the Board and Board support. This should be reviewed promptly and policy corrected accordingly.

Thank you for your patience to hear my concerns and best wishes in representing the retirees in the most responsible manner.

Respectfully,
Ralph R. Roshong
STRS retiree