The Boston Globe reported the fund’s two top managers are eligible for the same bonus as executive director Michael Travaglini and other employees could qualify for annual bonuses equal to 30% of pay.
Under the plan, employees would receive bonuses if the fund exceeds a composite industry benchmark by three-quarters of 1%. For the past three years, the state pension fund earned 16.25% a year, 1.03% higher than the benchmark during the period, the Globe pointed out.
The bonus plan was a compromise offered after an earlier version that could have doubled Travaglini’s pay was opposed by Governor Deval Patrick and then abandoned by state Treasurer Timothy P. Cahill, chairman of the board. Cahill defended the bonus plan, saying he knew it would be controversial, but the plan was a tool to help the fund attract qualified managers.
Cahill also pointed out the public had expressed that pension fund staff pay should be based on performance and that is what the new plan does.
However, some lawmakers said the plan – which could cost as much as $950,000 a year, based on current salaries – is too expensive, especially given the state’s shaky finances, according to the Globe.
“I don’t think you’ll find anybody in another state agency who has this type of arrangement,” said state Senator Richard R. Tisei of Wakefield, the Republican minority leader, in the news report. “Even in the private sector, people aren’t receiving bonuses anywhere near that amount. They seem a bit exorbitant. One of the pitfalls of having an independent agency is that it marches to its own drummer.”
On the other hand, Alex Aikens, a board member and a Brandeis University business professor, told the Globe he voted against the plan because he thinks it does not pay enough. He said a consultant hired to look at the pay practices concluded the pension board pays less than many other successful public pension systems.
“Our bonus plan should reflect bonus plans of the top public pension funds,” Aikens said, in the news report. “That’s what we aspire to be. I have never seen a top-performing firm pay like a mediocre firm.” The board “has to think like a private sector firm and not go for the mediocre.”