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sschullo
Joined: 01 Apr 2007
Posts: 572
Location: Rancho Mirage, CA
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 Posted: Sun Apr 19, 2009 7:02 pm Post subject: California Pension Fund Managers get bonuses |
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Hi,
Realizing the debate over bonuses has been discussed here before; I just found this little bit of news today.
I have been a close watcher of my pension fund CalSTRS for many years. I was a candidate for the election for the retirement board in 2004. I never up to now realized that the top people were getting paid bonuses.
BTW, CalSTRS’s pension lost 33% from July 2007 till the present. From 171 billion to 114 billion.
The "incentive" payments are nowhere near the amounts paid to the huge brokerage house managers, but the timing is not right and the funds lost money! This is in the wake of thousands of teachers getting laid off here in California. This will tarnish CalSTRS otherwise good name.
What you think?
http://www.sacbee.com/topstori....8-t46.html
http://www.sacbee.com/topstori....91260.html
Compared to top elected California officials: http://www.dpa.ca.gov/salaries/elected/main.htm
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The market is weird. Every time one guy sells, another one buys, and they both think they're smart!
Last edited by sschullo on Mon Apr 20, 2009 12:11 am; edited 3 times in total |
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yobria
Joined: 20 Feb 2007
Posts: 2163
Location: SF CA USA
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| Posted: Sun Apr 19, 2009 11:33 pm Post subject: |
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Interesting, one way we could determine if these officers are overpaid is to look at turnover. If everyone's been there 10+ years, implying no better opportunities externally, bonuses probably need to be reduced.
Nick |
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sschullo
Joined: 01 Apr 2007
Posts: 572
Location: Rancho Mirage, CA
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| Posted: Mon Apr 20, 2009 12:33 am Post subject: |
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http://www.calstrs.com/About%20CalSTRS/Execs.aspx
Derman and Ailman have ten years with CalSTRS. Platt--22 years and Ford just 5 years. Ehnes, the CEO bio does not say when he joined CalSTRS.
I don't believe they have much executive staff turnover.
What makes me angry is that these bonuses were approved by the Board. There are 3 teacher representatives on this board. What were they thinking?(*&^% in the wake of the plan losing 57 billion.
Steve
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sschullo
Joined: 01 Apr 2007
Posts: 572
Location: Rancho Mirage, CA
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| Posted: Mon Apr 20, 2009 2:45 pm Post subject: |
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Hi,
I asked the reporter how did he got this information about bonuses.
He wrote:
Hi Steve:
Reaction to the story from retirees has been mixed. Folks like you are angry at the bonuses. Other folks are angry at me for reporting them.
As to how I found out, it started with noticing a change in AB 53 (a bill to stop bonuses for all state employees for 2 years) that lined out the word, "bonus," and strike outs to some other sentences that would have stopped bonuses. When I asked Senator Portantino's office about it, they told me that CalPERS had opposed the language in the bill. So I requested bonus info from CalPERS and, just out of curiosity, CalSTRS.
It's all public record, the funds just don't highlight it. You have to know who and how to request it.
Thanks for reading. Hang in there.
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stratton
Joined: 04 Mar 2007
Posts: 8172
Location: Puget Sound
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| Posted: Mon Apr 20, 2009 5:13 pm Post subject: |
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What period were the bonuses for?
A lot of bonuses paid in 2008 were for investment performance in 2007 and/or part of 2008 before losses occured.
I do agree that bonuses should be more aligned with investors by having a significant portion (1/2 or more) paid out in following years based on follow on performance. That way juicing the returns short term won't help them.
Paul |
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grumel
Joined: 30 Mar 2007
Posts: 1629
Location: Germany
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| Posted: Mon Apr 20, 2009 5:22 pm Post subject: |
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| yobria wrote: | Interesting, one way we could determine if these officers are overpaid is to look at turnover. If everyone's been there 10+ years, implying no better opportunities externally, bonuses probably need to be reduced.
Nick |
Salery is about the last to think about in that pay regions to explain turnover.
I would even think the other way round. To high saleries attract people that just care about their salery, which creates more turnover. |
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chaz
Joined: 27 Feb 2007
Posts: 6813
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| Posted: Mon Apr 20, 2009 6:21 pm Post subject: |
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CALPers officers earned the incentive bonus each was awarded for doing a good job (during a bad year).
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Chaz
"It is better to travel well than to arrive." - Buddha
http://www.bogleheads.org/wiki/index.php/Main_Page |
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yobria
Joined: 20 Feb 2007
Posts: 2163
Location: SF CA USA
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| Posted: Mon Apr 20, 2009 10:21 pm Post subject: |
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| sschullo wrote: | http://www.calstrs.com/About%20CalSTRS/Execs.aspx
Derman and Ailman have ten years with CalSTRS. Platt--22 years and Ford just 5 years. Ehnes, the CEO bio does not say when he joined CalSTRS.
I don't believe they have much executive staff turnover.
What makes me angry is that these bonuses were approved by the Board. There are 3 teacher representatives on this board. What were they thinking?(*&^% in the wake of the plan losing 57 billion.
Steve |
I dunno, I bet in this market you could have lowered those bonuses without turnover. These types of organizations are monopolies, the job risk is minimal, so big bonuses should not be the norm. If you're selling widgets, and you made better widgets than the competition and so earned big profits in a competitive market, you deserve a big bonus. Otherwise...
I don't think these guys should be paid based on fund performance either - that just encourages risk taking. OTOH good employees at any level should be rewarded, otherwise (especially at monopolies where people rarely get fired), there's an incentive to work as little as possible.
Nick |
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sscritic
Joined: 06 Sep 2007
Posts: 3976
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| Posted: Mon Apr 20, 2009 10:32 pm Post subject: |
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| yobria wrote: | | These types of organizations are monopolies, the job risk is minimal, so big bonuses should not be the norm. |
It would be a monopoly if there were only one public retirement system in the US. However, there are more than two in California alone (UCRS, CalPERS, CalSTRS). Probably at least one in every other state. The top employees could also go to work for university endowments, which pay quite well. |
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sschullo
Joined: 01 Apr 2007
Posts: 572
Location: Rancho Mirage, CA
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| Posted: Tue Apr 21, 2009 12:40 am Post subject: |
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| stratton wrote: | What period were the bonuses for?
Paul |
The bonuses were paid last August for 07-08 year. CalSTRS fiscal year goes from July 1 to June 30. CalSTRS lost about 3% for that year.
So far, this year CalSTRS lost about 30%. But according to the article: "Despite continued losses in the market, both funds expect to cut more bonus checks, which they call "incentive awards," this summer."
It is troubling that this entire matter was very secretive as the reporter said.
Steve
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Wagnerjb
Joined: 19 Feb 2007
Posts: 3866
Location: Houston, Texas
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| Posted: Tue Apr 21, 2009 8:35 am Post subject: |
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| chaz wrote: | | CALPers officers earned the incentive bonus each was awarded for doing a good job (during a bad year). |
You mean they were paid for their own actual good performance? Wow...what a novel concept. Apparently, the American people don't like this concept (except when it applies to them) because they seem outraged whenever bonuses are paid to employees in companies that have suffered significant downturns.
Let's keep "pay for performance" alive.
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Andy |
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Adrian Nenu
Joined: 12 Apr 2007
Posts: 4475
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| Posted: Tue Apr 21, 2009 9:49 am Post subject: |
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| Quote: | You mean they were paid for their own actual good performance? Wow...what a novel concept. Apparently, the American people don't like this concept (except when it applies to them) because they seem outraged whenever bonuses are paid to employees in companies that have suffered significant downturns.
Let's keep "pay for performance" alive.
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Using that logic, I should have been given a raise as well, even though there is less money in the budget, overtime and comp time have been elminated, my pay has been cut by at least 10%, over 10% of the employees have been laid off and I have to work an additional 108 hours a year on 12 hours shifts instead of 8's. But I am doing a good job according to my evaluations so where is my raise?! The budget dowturn isn't my fault.
Let's keep "pay for performance" alive. Yeah, right. The big shots get the raises while the little people suffer the cuts.
Adrian
anenu@tampabay.rr.com |
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Harold
Joined: 03 Mar 2007
Posts: 1328
Location: San Francisco
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| Posted: Tue Apr 21, 2009 10:06 am Post subject: |
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| Wagnerjb wrote: | | chaz wrote: | | CALPers officers earned the incentive bonus each was awarded for doing a good job (during a bad year). |
You mean they were paid for their own actual good performance? Wow...what a novel concept. Apparently, the American people don't like this concept (except when it applies to them) because they seem outraged whenever bonuses are paid to employees in companies that have suffered significant downturns.
Let's keep "pay for performance" alive. |
Did they elaborate on what this "good performance" was? I scanned (quickly) each of the linked articles/charts and didn't see it. I suspect the way many of us define "good performance" might differ from how those who approved the bonuses saw it. |
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sscritic
Joined: 06 Sep 2007
Posts: 3976
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| Posted: Tue Apr 21, 2009 10:19 am Post subject: |
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One of the boglehead's mantras: Keep costs low!
| Quote: | | In 2007-08, CalPERS paid $8.5 million in costs to manage $152 billion in assets in-house and $104 million to outside firms that managed $57 billion in assets. |
Instead of paying bonuses to their in-house managers, they could have paid an outside management firm thirty times as much. (in-house ER = 0.0056%; outside ER = 0.18%)
Instead of outrage at the bonuses paid their management team, there should be outrage at what they pay outsiders to manage a portion of their assets. |
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yobria
Joined: 20 Feb 2007
Posts: 2163
Location: SF CA USA
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| Posted: Tue Apr 21, 2009 10:37 am Post subject: |
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| sscritic wrote: | | yobria wrote: | | These types of organizations are monopolies, the job risk is minimal, so big bonuses should not be the norm. |
It would be a monopoly if there were only one public retirement system in the US. However, there are more than two in California alone (UCRS, CalPERS, CalSTRS). Probably at least one in every other state. The top employees could also go to work for university endowments, which pay quite well. |
My point wasn't that these employees couldn't find other jobs. It was that top managers and employees of monopolies don't deserve bonuses as much as those of competitive corporations. The risk of failure, and the hard work that you have to do to keep up with the competition isn't there. Only after working at an organization like CalPERS did I realize how dramatic the difference was.
Nick |
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stratton
Joined: 04 Mar 2007
Posts: 8172
Location: Puget Sound
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| Posted: Tue Apr 21, 2009 10:41 am Post subject: |
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Should the bond folks get bonuses if they do well, but the equity ones don't?
Paul |
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3CT_Paddler
Joined: 04 Feb 2009
Posts: 1195
Location: Marietta, GA
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| Posted: Tue Apr 21, 2009 11:31 am Post subject: |
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| Adrian Nenu wrote: | | Quote: | You mean they were paid for their own actual good performance? Wow...what a novel concept. Apparently, the American people don't like this concept (except when it applies to them) because they seem outraged whenever bonuses are paid to employees in companies that have suffered significant downturns.
Let's keep "pay for performance" alive.
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Using that logic, I should have been given a raise as well, even though there is less money in the budget, overtime and comp time have been elminated, my pay has been cut by at least 10%, over 10% of the employees have been laid off and I have to work an additional 108 hours a year on 12 hours shifts instead of 8's. But I am doing a good job according to my evaluations so where is my raise?! The budget dowturn isn't my fault.
Let's keep "pay for performance" alive. Yeah, right. The big shots get the raises while the little people suffer the cuts.
Adrian
anenu@tampabay.rr.com |
I think it is up to those who are impacted by the probably poor decisions of these fund managers (those who have their retirement pension with them) to ruffle some feathers. I do think it is ludicrous that these bonuses are paid, but at the end of the day it is a free country and it is up to the people affected to call for better fiduciary responsibility. I agree with Adrian that many of us have seen cuts to benefits and pay even though we may be working harder than ever. I think people are outraged that they see cuts to their salary and benefits, yet those who have lost millions or billions in managing funds can still pay themselves a nice salary. If you are working for a company that actually produces a product and sales are down everyone in the company hurts, but if you are managing a gigantic mutual fund that drops 30, 40, 50% you can still pay yourself because hey 5 million in bonus money is tiny compared to the 10 billion in assets your company is managing. |
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Wagnerjb
Joined: 19 Feb 2007
Posts: 3866
Location: Houston, Texas
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| Posted: Tue Apr 21, 2009 11:33 am Post subject: |
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| Harold wrote: | | Wagnerjb wrote: | | chaz wrote: | | CALPers officers earned the incentive bonus each was awarded for doing a good job (during a bad year). |
You mean they were paid for their own actual good performance? Wow...what a novel concept. Apparently, the American people don't like this concept (except when it applies to them) because they seem outraged whenever bonuses are paid to employees in companies that have suffered significant downturns.
Let's keep "pay for performance" alive. |
Did they elaborate on what this "good performance" was? I scanned (quickly) each of the linked articles/charts and didn't see it. I suspect the way many of us define "good performance" might differ from how those who approved the bonuses saw it. |
In the company where I work, about 15 years ago we went to a system where 5-10% of our pay is "at risk". For all employees. This allows the company to pay "below market" when our performance is poor, and "above market" when our performance is good. This is done through the bonus system.
Half of the bonus is based on the overall firm's performance, and the other half is based on the individual's performance. When the company is suffering, the 50% based on firm performance allows us to reduce costs. But we also always recognize individual performance, even in bad years. This allows you to differentiate the best performers from the ordinary performers, even in lousy years.
For upper management, the percentage of pay at risk is higher than the 5-10%, but the principles are exactly the same.
Best wishes.
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Andy |
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3CT_Paddler
Joined: 04 Feb 2009
Posts: 1195
Location: Marietta, GA
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| Posted: Tue Apr 21, 2009 11:35 am Post subject: |
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| yobria wrote: | | sscritic wrote: | | yobria wrote: | | These types of organizations are monopolies, the job risk is minimal, so big bonuses should not be the norm. |
It would be a monopoly if there were only one public retirement system in the US. However, there are more than two in California alone (UCRS, CalPERS, CalSTRS). Probably at least one in every other state. The top employees could also go to work for university endowments, which pay quite well. |
My point wasn't that these employees couldn't find other jobs. It was that top managers and employees of monopolies don't deserve bonuses as much as those of competitive corporations. The risk of failure, and the hard work that you have to do to keep up with the competition isn't there. Only after working at an organization like CalPERS did I realize how dramatic the difference was.
Nick |
That is exactly what I was trying to say in my previous post. Interesting that you actually have worked at an organization like CalPERS. Do you have any more insights on the difference between a competitive corporation and a CalPERS? |
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sschullo
Joined: 01 Apr 2007
Posts: 572
Location: Rancho Mirage, CA
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| Posted: Mon Apr 27, 2009 7:26 pm Post subject: |
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Update,
This is getting interesting.
The teacher rep and retirement board Chair defends the decision to pay bonuses to top CalSTRS brass! in spite of the economy when thousands of her colleagues are losing their jobs.
http://www.sacbee.com/californ....08453.html
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The market is weird. Every time one guy sells, another one buys, and they both think they're smart! |
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