Editorial: Pinnacol audit shows need for better oversight

By THE VOICE OF AURORA
The Aurora Sentinel
June 7, 2010
http://www.aurorasentinel.com/articles/2010/06/07/opinion/editorials/doc4c0d3d7bd5ba5392847240.txt

A report released Monday from the Colorado Office of the State Auditor shows just how urgently Colorado's largest workers compensation fund needs effective, impartial oversight - now.

The 103-page report details in no uncertain terms that Pinnacol Assurance's CEO and vice presidents have been handsomely compensated by any measure.

In that report, the state audit bureau shows that during a three-year span between 2006 and 2009 when most out-of-state public workers compensation funds salaries were on the decline, executive pay at Pinnacol increased. Similarly, compensation for CEOs at other statewide semi-public entities like the Regional Transportation District, the Colorado Housing and Finance Authority and the Public Employee Retirement Association has not increased as dramatically as that of Pinnacol — and in some cases, compensation has decreased.

Indeed, Pinnacol's executives have awarded themselves substantial bonuses over the past few years — in some cases from one-third to one-half of their base salaries, the report shows - totaling more than $1.9 million in bonuses from 2007 to 2009.

But in detailing the bonuses and salaries paid out to executives, auditors underscore a significant point of this whole Pinnacol fiasco.

In the report, auditors suggest that from 2002 to 2008, Pinnacol's appointed board for oversight intentionally set performance goals at or below the year before, allowing executives to max out bonuses. Non-discretionary bonuses were paid for often meeting the same targets under performance plan targets, totaling $179,000 in additional payouts over the same time period.

Such payouts are rendered almost unfathomable considering the audit bureau found that Pinnacol may have been unfairly charging some businesses a higher rate than necessary, without intervention from the oversight board.

While it's easy to bristle at the yearly compensation paid to Pinnacol's CEO of more than $500,000 year, that's the unfair reality of high-level executives in comparable private-sector employment.

What's more disturbing is that the board appointed to protect taxpayers and protect the businesses that dump millions into Pinnacol's coffers each year in workers compensation insurance were working instead to aid and assist the unchecked entertainment spending and inflated bonuses paid to executives.

Workers in Colorado deserve a board that will protect their interests too, not only their insurer's interests.

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