The State Compensation Insurance Fund board of directors last week agreed to hire a Sacramento-based executive recruitment firm to handle the search for a full-time replacement for departed president Jan Frank. The board also granted performance bonuses to many executives while at the same time the quasi-public agency refuses to make public the duties or expectations of those public officials or others within its organization. “To the extent that our job descriptions are intertwined with strategy and performance, they advised we cannot share them without a legal review of each document,” says a State Fund spokesperson.
Meanwhile, State Fund’s Doug Stewart continues as interim president and is a candidate for the permanent position. He seems to be campaigning externally, using public appearances and keynotes throughout the industry.
State Fund is going back to the same well, hiring the IR Group Companies to handle the search and vetting of both internal and external candidates for the position. State Fund used the same firm during its last executive search, which resulted in the hiring of Jan Frank. At the time, Frank was an executive with CNA Financial in Colorado and became State Fund’s first president to be hired without extensive State Fund experience.
The hunt for an executive search firm involved the issuance of 15 different requests for proposals to various agencies around the nation, producing four responses. The board’s governance committee reviewed the responses and recommended sticking with the familiar. In presenting the recommendation to the full board, chairwoman Jeanne Cain said IR Group was selected for its “experience, knowledge of State Fund and the amount of the contract.”
State Fund officials also have refused to disclose the amount or other terms of the contract. It is being kept secret, but the proposal to hire IR Group was adopted by a unanimous vote of board members present. State Fund maintains that the terms of the contract can be kept confidential for up to a year. But searches of this kind generally cost in the range of 20% to 30% of the total first year compensation, including hiring bonuses and projected performance bonuses.
Bonus Time
While the search for a full-time president is expected to take several months to complete, the board plans to develop a set of performance measures and incentives for Stewart to meet in 2010. The measures will be used to determine his performance bonus in 2010, which under a policy adopted last fall could go as high as $40,000 this year.
As for executive bonuses from 2009, the board ratified a number of bonus awards, including a major payout to Frank, who soon will earn a paycheck from rival Zenith Insurance. On a full-year basis, Frank was eligible to receive up to 40% of her $450,000 annual salary as a performance bonus. After reviewing her performance, the board determined that her performance qualified her for 95% of the available bonus. She will be paid on a prorated basis for the time she actually spent in the position. In other words, she will receive approximately $128,000 in bonus pay, but a full accounting was not made available as of press time.
Other executives on the team earned the full 15% of their base salary, the maximum available under the bonus policy adopted by the board. In two cases, the board did bend this policy somewhat to recognize two executives who have been with the carrier for less than a year — chief investment officer Peter Guastamachio and chief information officer Shaun Coyne.
Guastamachio joined State Fund last February, but the board awarded him 15% of his annual salary in recognition of the extra duties he took on while State Fund searched for a new chief information officer. And Coyne was awarded 15% of a half-year’s base salary. Coyne just joined the carrier in September, but the board noted that he had exceeded expectations to date.
State Fund continues to refuse to provide or make public the duties and performance expectations of various officers and department heads. They are public officials and part of the governing system. State Fund says the duties are standard in the industry. The question is: Which industry? Insurance or government?