Dennis Leone: Board members, not STRS membership, should pay out of their own pockets
From Dennis Leone, September 14, 2009

From what I understand, Laura Ecklar is telling people who ask that the board will be voting, this Friday, on a new plan pertaining to the payment of partial year bonuses for the STRS investment staff. This is clearly in response to my repeated written statements that the board caused an embarrassment to the pension system by not voting to stop the bonuses one year ago. Instead, to refresh everyone’s memory, the board allowed the bonus plan to continue, even though our losses at that point were approaching $20 billion.

Finally, after first rejecting my push to suspend the bonuses, the board voted 6-3-1 (Myers, Meuser and Ramser did not support my motion) this past January to suspend the bonuses for the last 5 months of the 2009 fiscal year (which ended on June 30, 2009). This means that because of staff and Board stupidity, a vote must be taken to pay (or not to pay) the bonuses for the first 7 months of the prior fiscal year.

Another motion I made NOT to pay the bonuses as recently as this past June was soundly rejected. The new board plan, cleverly designed to pacify critics, calls for a reduced and delayed bonus payment. While this may be a slight improvement over the planned $3.4 million payment, people should not be fooled by what it says. The fact remains: The investment staff lost money and a bonus is a bonus, even if is awarded at a later date (assuming a stock market improvement).

I suspect that board will want the membership to think that a reduced and a delayed bonus is okay. No it is not. I am of the opinion that the board members who ignorantly allowed the bonus plan to go forward one year ago should pay for the bonuses out of their own pockets. Instead of stopping the bonuses in response to the pension system experiencing a gigantic drop in assets, instead of listening to retirees who were outraged over the $6.0 million payment for bonuses in fiscal year 2008 (when STRS assets dropped 5.4%), and instead of realizing how foolish it was to be paying such bonuses when all STRS members would soon have to do with much, much less, the board and the staff both believed they knew what was best for the membership and stopped nothing until it was too late.

Dennis Leone