Anonymous reader argued through earlier comments that comparisons between BC Investment Management Corporation and Washington State Investment Board are inappropriate “apples and oranges.” The person attempted to justify huge increases in executive compensation because “Much of the compensation is based on results over the past 4 years.” This question was also posed, “What are the long-term returns of both organizations.”
First, I’ll deal with long term returns. Since 2005, BCiMC averaged 7.2% annual rate of return while WSIB averaged 8.5%. With invested funds amounting to a hundred billion or so, over nine years, the difference in income amounts to roughly $10 billion.
Washington’s investing agency was ranked by Pew Research fourth in the USA for combined funding of its 13 pension programs. Despite WSIB paying about 1/4 of the wage costs of BCiMC, the State Treasurer reported,
“The Washington State Investment Board has averaged over 8 percent annual return on pension funds for the past 20 years – which makes it the number one performer among all public pension investors in the nation.”
No wonder the BCiMC apologist objected to comparisons with our nearest neighbour.
Are salaries established based on results? Apparently not for the most senior executives of BCiMC. In 2010, the five highest paid received $3 million and the rate of return for the year was 16.3%. In 2013, the fortunate five earned $5 million — that same amount paid the top 35 earners at WSIB — and the rate of return in BC was 9.5%. In the two most recent years, while returns averaged 7.7% (against the four year average of 10.6%) the guys in the corner offices had remuneration jump by 50%.
There is another matter of interest in the 2013 annual report of BCiMC. It is a note to the audited financial statements that says,
“Minimum lease payments based on current and new lease agreements in effect as at the periods below are as follows: 2012 $3.9 million; 2013 $30.6 million.” That extraordinary increase is explained by management in this fashion:
“Jawl Properties, our landlord, is developing a mixed-use building that includes office space to accommodate our planned growth. Work on the site adjacent to our existing offices began in 2012.”
Sharp readers will recall that Jawl Properties was involved with BC Ferries when that organization decided it needed higher status premises with better views of the ocean. I wrote Luxurious new offices and enduring gratitude in 2011. It contained this:
“In 2008, the company announced plans to move into 90,000 square feet of a building at 800 Yates Street then under construction by Jawl Properties. B.C. Ferries sold its long time head office building, 53,000 sq.ft. at 1112 Fort Street, to the Jawls for $11 million. By sheer good fortune, the new owners quickly found another tenant: Elections BC.
“According to Note 12 on the BCF 2011 Audited Financials, the lease of new offices in downtown Victoria is for fifteen years, with four renewal options of five years each. The lease agreement includes payment of building operating costs and property taxes but other terms are undisclosed.
“In addition to signing a long term lease before completion, BC Ferries lent the Jawls, developers of the $100 million property, $24.2 for fifteen years, secured by a second mortgage of the property.
“What does BC Ferries get out of this? Certainly, it gets substantially more luxurious executive offices, almost twice the size of those in the old building. They also earn enduring gratitude of the influential Jawl family, people who style themselves as the largest private owners of premium offices and industrial space in the capital. Their properties include Cordova Bay Golf Course, Mattick’s Farm, Sayward Hill and Selkirk Waterfront. They are, of course, substantial contributors to the BC Liberal Party.”
I find it strange that, while BCiMC operates in many cities as a major landlord and has accumulated $18-billion in real estate assets, it made good business sense to become rental tenants of the BC government’s favourite property developer.
As I’ve said repeatedly, BCiMC is an enterprise with massive assets that operates without effective oversight. There are indicators of wrongdoing in the small pieces we can examine but the real opportunity for abuse is hidden from view. That relates to where and with whom these people invest the $100 billion dollars under their control. The directors that could hold management to account are instead porcine feeders at the same trough.