As the quasi-public State Compensation Insurance Fund continues its plan to downsize, several of its employees have contacted The State Worker to point out a section of a 2009 RAND Institute for Civil Justice study that recommends reducing the number of the fund's permanent staff to remove incentives for it to maintain market share to justify State Fund's staffing.
Here's the pertinent paragraph from "California's Volatile Workers' Compensation Insurance Market: Problems and Recommendations for Change," by Lloyd Dixon, James W. Macdonald, William Barbagallo.
Increase State Fund staffing flexibility. It is important to remove incentives for the State Fund to price more aggressively in a soft market, and such incentives may be created by the desire to maintain enough premium volume to support a fairly inflexible staffing level. The State Fund might consider setting a permanent staffing level required for a relatively low market share-- say, 10 percent--and then address additional demands using temporary staff and contractors.
Fund spokeswoman Jennifer Vargen said that the RAND report didn't figure into its decision to downsize: "Anybody looking at our organization could see we needed to cut expenses." Ultimately the fund is making cuts so that it can provide better value to clients, she said.
A few other State Fund employees have asked about the terms of President and CEO Tom Rowe's 2010 employment contract. They wonder if the deal includes incentives for downsizing staff.
You can click here to read Rowe's agreement, which includes a base annual salary of $450,000 plus up to a 30 percent bonus "based on Executive's achievement of specifically defined metrics and performance goals."
The fund considers that part of the deal private because those details are intertwined with State Fund's "enterprise strategy" Vargen said, something it doesn't want revealed to competitors.
Rowe's salary reflects a move by State Fund to pay more competitively for experienced insurance executives, in keeping with recommendations from the state Legislature and the California Department of Insurance, Vargen said.
It's worth noting, however, that even with a max bonus Rowe earns less than some other executives in comparable positions at private firms.
Douglas Dirks, president and CEO of Reno-based Employers Holdings, Inc. earns $831,000 annually. Janet Frank left the helm of State Fund for an executive vice president position with a $750,000 base salary plus bonuses and company stock at Zenith National Insurance Corp. in Woodland Hills. (Click here and scroll down to page 3 for more details about Frank's agreement.)
Compared with other exempt state executive jobs, Rowe's package looks better: CalPERS President and CEO Anne Stausbol made $329,500 last year, including an $86,600 bonus, according to state payroll records. CalSTRS CEO Jack Ehnes' 2010 salary and bonus pay totalled $421,500 (that was about $260,000 less than he earned in 2008).
You can read the unsigned copy of Rowe's employment agreement by clicking here.
PHOTO: State Fund President and CEO Tom Rowe / courtesy State Compensation Insurance Fund