Retire This Bonus System!

From John Curry, April 6, 2009

Retire this bonus system

Editorial, April 6, 2009
KansasCity.com

Picture the well-paid players on your professional baseball team exchanging back slaps and high fives at the end of the game — because they lost by fewer runs than anticipated.

The boos would be deafening.

The Missouri State Employees Retirement System has earned similar scorn by using cash bonuses, not back slaps, to celebrate a losing performance.

The taxpayer-supported system lost nearly $1.8 billion in the stock market last year. But its board has handed out nearly $300,000 in bonuses, claiming that, hey, things could have been worse.

The retirement fund, which covers most state employees, declined by nearly 24 percent in 2008. That’s dreadful, yet still better than most state retirement funds. And it beat the internal benchmark that is supposed to justify bonuses for the 14-member staff.

The chief investment officer, who makes $228,176 a year, received a $114,000 bonus. The second-highest bonus was $29,400, to the hedge fund’s manager.

It’s good that the pension fund has talented administrators. They save the state money, as Executive Director Gary Findlay told the St. Louis Post-Dispatch, which first reported the bonuses.

But in a year in which state employees are looking at flat salaries and layoffs, bonuses for the administrators of a losing investment fund are ostentatious and unseemly. The pension fund’s 11-member board of elected officials and appointees should rethink its practice of awarding bonuses based on a formula that weighs the fund’s performance against a blend of stock market indicators.

Most state retirement systems don’t reward their administrators with bonuses. And no system’s board should be bound by a formula to hand out bonuses in a year when the fund’s performance is poor and the public is simmering over a dismal employment picture and cuts in state services.

If the board isn’t willing to adopt a more sensible policy, Gov. Jay Nixon and legislative leaders should consider replacing members.

A 24 percent dip is nothing to celebrate — even if the rest of the market did worse.