Dennis Leone: A clarification of STRS Board policy

From Dennis Leone, January 17, 2009

While STRS Board members Ramser/Myers/Cervantes/Meuser all say the STRS Board is breaking a PROMISE by suspending the bonus checks. I completely disagree. Two reasons:

1. The wording of the Board policy states clearly that the Board retains the right, at any time, to suspend or modify the bonus plan for any reason. I can’t think of a better reason than a $30 billion drop in assets, can you?

2. If indeed, we are breaking a promise, then the board (minus new board members Burch and Myers, and minus Hayden – who was absent) has no one to blame but itself because it voted 8-1 last March to adopt a new bonus plan (to go into effect on 7-1-08) despite the fact that we had dropped $8 billion in the previous 4 months, and even though the Board was clueless how much we would drop in the final 4 months of FY 08 before the new plan would go into effect. I have told my fellow board members that, in my opinion, it ranks in the top 10 as one of the worst board decisions of the past decade. Extremely short-sighted. The decision of the board yesterday to suspend the bonuses and sharply restrict the level of future bonuses in down years was, in my mind, how the board corrected a decision from last March that never should have occurred in the first place.

Dennis Leone