Paying incentives

Paying bonuses to executives and other employees of private corporations receiving federal bailouts to stay in business has been the cause of considerable ire.

That anger is being directed toward the Missouri State Employees Retirement System, which paid $460,000 in bonuses last year as its investments lost $1.8 billion. Now MOSERS is paying another $160,000 in bonuses for meeting goals on customer service and cost efficiencies as the state's retirement portfolio performed better than market averages over the past five years.

It's difficult for many taxpayers to understand why MOSERS employees are getting an average of $2,800 each when the value of the system's investments dropped drastically. The conventional answer is in two parts.

First, MOSERS has a legally binding personnel policy regarding incentives. Employees are measured not on what happens in financial markets, but on how well they meet their job expectations. Second, the bottom didn't drop out of the bottom of the markets because of any decisions by MOSERS employees. The markets tanked because of a worldwide recession and credit meltdown.

These answers are largely correct. However, future MOSERS contracts should scrutinize more carefully how incentive plans are constructed. Actual return on investment -- especially on the downside -- should play a larger role in determining how bonuses are paid or, in dire cases, not paid.