STATE FUNDS
UTIMCO approves $3.4 million in bonuses
Compensation warranted because losses weren't as great as market declines, board says.
By Ralph K.M. Haurwitz
AMERICAN-STATESMAN STAFF
Saturday, November 21, 2009
The board of the University of Texas Investment Management Co. unanimously approved $3.4 million in bonuses for employees Friday despite a $4.4 billion decline in the higher education endowments they oversee.
The bonuses for the fiscal year that ended June 30 were warranted because the employees' investment skills kept investment losses smaller than those of market benchmarks for the period, said Erle Nye, chairman of the UTIMCO board.
 Harry Cabluck/ASSOCIATED PRESS Board chief Erle Nye said workers cut losses. |
The nonprofit investment company, which manages stocks, bonds and other assets for the UT System and the Texas A&M University System, drew criticism from Gov. Rick Perry and other state officials for the previous year's bonuses, which also totaled $3.4 million and which were approved as markets were tanking.
"Especially in these economic times it is difficult to defend performance bonuses when the performance of the financial markets and the fund are down over the last fiscal year," Allison Castle, a spokeswoman for Perry, said Friday. "The governor expects the new compensation plan, which was implemented after the governor and lawmakers raised significant concerns earlier this year, will be more in line with fund performance going forward."
The new plan, which took effect July 1, bars bonuses when endowment assets drop by more than 14 percent. If it had been in place for the preceding year, employees would not have been eligible for any performance incentive compensation.
J. Philip Ferguson, vice chairman of UTIMCO, said that six senior staff members, including CEO Bruce Zimmerman, have agreed to defer their bonuses for two years.
The deferred amounts they eventually receive will be adjusted at a percentage equal to the endowments' investment return during that period.
Zimmerman's bonuses, $576,234, are 45 percent less than the $1,050,000 he received a year ago. The larger award was earned during a period when the endowments enjoyed healthier returns.
"He's done a very good job," Nye said of Zimmerman.
The main endowments overseen by the company — the Permanent University Fund and the General Endowment Fund — stood at $14.2 billion on June 30, with investment losses of 22.4 percent for the preceding year. By contrast, the benchmarks for real estate, international stocks and other markets against which performance compensation is calculated dropped 25 percent.
Put another way, the endowments would have declined an additional $229 million if they had simply been invested in benchmark indexes, Zimmerman said. That sort of "value added" justifies the bonuses, board members said.
Bonuses were approved for 32 employees, most of whom are on the investment staff. Board members are not paid.
A year ago, 25 employees got bonuses, prompting criticism from Perry, Lt. Gov. David Dewhurst and members of the state Senate Finance Committee. Robert Rowling, a billionaire investor who was chairman of UTIMCO at that time and also a UT System regent, abruptly resigned both posts during a Finance Committee grilling in February.
The committee's chairman, Sen. Steve Ogden, R-Bryan, later tried unsuccessfully to change state law to impose new oversight and controls on the investment company, which answers to the UT System Board of Regents.
"We went through the debate about the appropriate level of compensation and how it ought to be awarded, and basically I lost," Ogden said Friday.
"It sounds to me like UTIMCO is acting well within their statutory and contractual authority. I don't have any criticism of it because I was unable to change the law."
rhaurwitz@statesman.com; 445-3604
