Florida state capitol building in Tallahassee.
Lamar Taylor, the interim executive director and chief investment officer of the Florida State Board of Administration, Tallahassee, is finally eligible for incentive compensation after over two years in the position.
The board's three trustees, who include Gov. Ron DeSantis, approved the change to board policy at its meeting on Oct. 25, a livestream of the meeting showed.
In September 2021, the board named Taylor as its top administrative and investment management official on an interim basis shortly before the retirement at the end of that month of Ash Williams.
The Florida State Board of Administration oversees $241.4 billion in state assets, including the $188.8 billion Florida Retirement System. As the top investment official of the sixth-largest U.S. pension fund, Taylor has been ineligible for incentive compensation for the two years he has held the position because he is only holding it on an "interim" basis.
"What about Lamar? You know he's like in 'Limbo Land,' and we talked about this last year where he wasn't eligible for certain things," said Peter Collins, a member of the board's investment advisory council in a webcast of its Sept. 12 compensation subcommittee meeting. "He's certainly doing the job and getting compensated at the old job. What do we have? What ability do we have, to make some effect, some change, even if it's interim change? I'd be interested in that."
Addressing Taylor in the meeting, Collins said, "It still sort of sticks in my craw that, you know last year, you didn't get any incentive pay and this year we're going to get you incentive pay but you still lost a year of incentive pay."
For the fiscal year ended June 30, the Florida Retirement System returned a net 7.5%, below its benchmark return of 10.1% for the period. Taylor held the interim position for the final nine months of the prior fiscal year, when the system returned a net -6.3%, above the benchmark return of -9.1%.
In the meeting, Collins suggested drafting a letter to the board's three trustees recommending Taylor be eligible for incentive compensation. John Goetz, chairman of the investment advisory council, offered to draft the letter.
"Our letter says he's performing the function," Goetz said in the Sept. 12 meeting, "Therefore, we think the compensation should be related to that function, all in a nice, near recommendation that (inaudible) can whip around at people on airplanes or whatever. I mean, I was saying we're going to have to be concise because I think we all know the distractions are freaking out of control. Is that fair?"
"No comment," Collins said.
Laughing, Goetz said, "I didn't say whether they were good or bad, so I'm fine being on the record."
On Sept. 19, the full investment advisory council unanimously approved sending the letter recommending Taylor be eligible for incentive compensation.
DeSantis is in the midst of his campaign to be the 2024 Republican nominee for president and along with his fellow trustees, state Chief Financial Officer Jimmy Patronis and Attorney General Ashley Moody, conducted the Oct. 25 SBA trustee meeting by phone while Taylor dictated a list of recommendations from the board room. The meeting lasted for less than 20 minutes.
In the letter to trustees, Goetz said that Taylor should be awarded incentive compensation for his role as interim executive director and CIO given the length of his tenure in that position. He also noted that Taylor was previously eligible for incentive compensation in his prior position as chief operating and financial officer, and that the approval of an amendment by trustees would be required to make him eligible in his current interim position.
The SBA's current policy for incentive compensation for its top official was established in 2015. The incentive opportunity in total is 100% of base salary, with 85% of the reward coming from the organization's financial performance, and 15% coming from individual performance.
Currently, the base pay range for the executive director is a minimum annual salary of $442,000 and maximum annual salary of $664,000.
Taylor himself has spent the last year working on improving overall organization compensation in order to recruit and retain employees.
At the SBA's Feb. 13 compensation subcommittee meeting, Taylor said the state board had experienced 12% turnover in the prior year primarily due to retirements, and that in the recent past overall the board had experienced the same kinds of challenges with staffing as their peers as a result of the post-COVID tightening of the labor market, according to minutes of that meeting.
According to a survey conducted by Pensions & Investments, the board's investment staff totaled 88 employees as of Sept. 30, 2022, down from 108 employees a year earlier.
At the Feb. 13 meeting, Taylor recommended addressing issues on base salary and incentives because a compensation study conducted by Mercer showed that the SBA was in the bottom quartile of its peers in base salary.
At the Sept. 12 meeting, Taylor — who has the authority over staff compensation as executive director, even on an unexpectedly long-term interim basis — presented a summary of salary adjustments for all staff completed in December and July.
The largest increases between December and July, for example, were reserved for junior internal investment staff, particularly the first two grades of portfolio managers, which saw increases of 21% and 28% of base pay, respectively.
Taylor cited the need to recruit junior staff in the near future because one-third of overall staff will eligible for retirement within the next five years. Of the 228 staff members at the Florida State Board of Administration, 76 will be eligible to retire by the end of 2028.
Of total staff, there are 69 employees who are incentive-eligible, with 22 being able to retire by the end of 2028.
"We requested funds sufficient to try to move us meaningfully to the median target of our peers," said Taylor in the Sept. 12 meeting, "and take that medicine in one fell swoop. We implemented that in July for a market adjustment, and pretty much everybody at the board got some movement to their median market compensation for their pay grade, and so that has been helpful."
"I think we will see benefits from that in terms of recruitment and retention," said Taylor.
Taylor referred questions to the webcast of the compensation subcommittee meetings. Goetz, also managing principal and co-CIO of Pzena Investment Management, could not be immediately reached for comment.
