Bob Stein on bonuses

From Bob Stein, April 10, 2009
[Quoting from a previous e-mail]
Bob's website: www.growthchoices.com

I would have voted to eliminate the current PBI plan but I would also seek to eliminate the process that created it in the first place. The current plan was ill-conceived and the board should have known as much at first reading. The PBI plan set indexed goals and left unstated that the board and members expected an absolute positive return. The entire compensation package, including PBIs, should be revised. It should be understandable to both the members and the investment staff and reflect the fact that the members expect positive returns before bonuses are paid. I personally have no problem paying a staff of rare and highly qualified people for outstanding performance in any field. I have tipped people in just about every field for exceptional work -- contractors and doctors generally are surprised. But, given the right tools, investment staff should be able to consistently make money in any market condition. I understand an occasional moderately losing year or two as long as there is a reasonable plan to ameliorate the situation. I become very concerned when we take a 40% loss and then I hear STRS representatives say in presentations that "this economic situation is unprecedented" and "nobody saw this coming", but conclude that "everything is OK because losses like this were part of our plan". When people put statements like these together it is fairly clear that they are engaging in a delusion of attribution and they probably don't understand the "plan" that they apparently think they have. Was it part of the plan to drive the fund to periodically to the point of fiscal emergency? If investment staff can produce high and consistent returns under the conditions outlined above then they deserve good pay and bonuses voted on a year to year basis, probably at year end. If they can not, we need to make changes in their education, methodologies, or the staff. (...)

Long-term investment strategy is my campaign focus because it is the single area of experience and training that clearly differentiates me from the other candidates. It is a single issue that nearly everyone agrees is an area of STRS under-performance and the one that will make or break STRS over the next five years. Failed STRS investments = No health care, No expense discussions, No COLA discussions, problems paying pensions, etc.
Note: Bob website also includes his statement regarding bonuses. www.growthchoices.com