{"id":1629,"date":"2009-07-22T22:19:23","date_gmt":"2009-07-23T06:19:23","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=1629"},"modified":"2009-07-23T17:30:30","modified_gmt":"2009-07-24T01:30:30","slug":"hosed-in-missouri","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/hosed-in-missouri\/","title":{"rendered":"Sold down the river in Missouri"},"content":{"rendered":"
\"Missouris

Missouri state's HR department<\/p><\/div>\n

The nice people at MOSERS, the Missouri state pension fund, had a bonus plan.\u00a0 They beat their targets, earning their bonus.\u00a0 The Governor and legislature denied them their bonus.<\/p>\n

Governor Jay Nixon called $300,000 in bonus payments to the 14-member staff of the Missouri State Employees’ Retirement System (MOSERS) “unconscionable.”<\/em><\/p><\/blockquote>\n

<\/a>Unconscionable?\u00a0 What happened<\/a>?<\/p>\n

\n

MOSERS’ incentives are based on a five-year cycle.\u00a0 The bonus payments paid this year were based on fund performance from January 1, 2004, through December 31, 2008.\u00a0 In that period, says <\/em>[Executive Director Gary] <\/em>Findlay, MOSERS had an overall return of 3.9% compared with its benchmark of 1.8%. (the benchmark is the performance of the asset allocation if it were invested passively).<\/em><\/p>\n<\/blockquote>\n

\n

The difference to MOSERS between a 3.9% rate of return and a 1.8% rate of return over that period, points out Findlay, is $600 million.\u00a0 So, the MOSERS investment staff added $600 million in value to the fund’s assets for bonus payments of $300,000, which is 5\/100 of 1%.<\/em><\/p>\n<\/blockquote>\n

So, tell me again, why did the politicians hose the MOSERS fund managers?<\/p>\n

[Chairman of the legislature’s pension committee, Senator Gary] Nodler argues that payment of bonuses makes no sense in any year in which the fund experiences no actual growth.\u00a0 When the fund loses money, he says, then there is no money from which to pay the bonuses except to go into current assets. \u00a0 And that, he says, is a misappropriation of funds and a breach of fiduciary responsibility.<\/em><\/p><\/blockquote>\n

Makes no sense, indeed.<\/p>\n

I give Nodler points for creativity, however.\u00a0 I have never heard a “breach of fiduciary responsibility” allegation used to cover up a breach of contract and a breach of good faith.\u00a0 You have to have a highly cultivated sense of mendacity to make this stuff up while summoning outrage for the cameras.<\/p>\n

If the politicians had a shred of integrity, they would have told their pension fund managers five years ago that they would under no circumstances get any bonuses when absolute returns were negative.\u00a0 That way, the managers could have evaluated their compensation fairly versus their other opportunities, and decided whether they wished to stay or take their talents elsewhere.\u00a0 Given that the pols agreed to a bonus plan, their ignorance of its terms, or difficulty in explaining to the public why they are making payouts, is not a reason to stiff their employees.\u00a0 At best, if they decided after the fact that they wanted to pay for absolute performance rather than relative performance, then they should recalculate the bonuses earned in past years under this plan on an absolute basis, and pay them consistently.\u00a0 As it stands, the Missouri politicians were content to pay bonuses based on relative performance when peer fund returns were positive, but for absolute returns when the funds are negative.<\/p>\n

And that is why politically run systems can’t outperform private sector ones.<\/p>\n","protected":false},"excerpt":{"rendered":"

The nice people at MOSERS, the Missouri state pension fund, had a bonus plan.\u00a0 They beat their targets, earning their bonus.\u00a0 The Governor and legislature denied them their bonus. Governor Jay Nixon called $300,000 in bonus payments to the 14-member staff of the Missouri State Employees’ Retirement System (MOSERS) “unconscionable.” Unconscionable?\u00a0 What happened? MOSERS’ incentives […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,5,21,14],"tags":[42],"class_list":["post-1629","post","type-post","status-publish","format-standard","hentry","category-collectivist-instinct","category-executive-compensation","category-politics","category-scandal","tag-show-me-the-what"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1629","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1629"}],"version-history":[{"count":9,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1629\/revisions"}],"predecessor-version":[{"id":1631,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1629\/revisions\/1631"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1629"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}