Dallas billionaire Robert Rowling, chairman of the UTIMCO board, today abruptly resigned while under heavy fire from members of the Senate Finance Committee about $2.3 million in bonuses paid to fund managers for the University of Texas System and Texas A&M System's endowment, which has declined 27 percent this year.
"I spend half my life on UTIMCO. You can have this job. I resign," Rowling told the committee. "We did what we thought was right."
Rowling, owner of the parent corporation for Omni Hotels and Gold's Gym, gave his resignation as a retort to an emotional upbraiding (rant?) by Sen. Kevin Eltife, who voiced the frustration of the committee by blasting the bonuses.
"We are in uncharted territory," Eltife said, referring to the U.S. economy. "And state government gave $2.3 million in bonuses to managers of a fund that lost 27 percent. It shatters trust in government. Every one of us is going to take the blame for this."
Rowling, who also serves on the UT board of regents, defended the compensation of UTIMCO managers, noting that the bonuses were paid according to a compensation package which compares the Texas fund performance to its peers, i.e. other university endowments with over $2 billion in assets. The bonuses covered the year ending in June 2008, when the Texas fund was up by two percent at a time when other funds, like Harvard's, had lost ground. "To change it (the bonus arrangement) would be to go back on our word," he said.
Not good enough, responded Finance committee members. The bonuses were unanimously approved in November, at a time when both the Texas fund and the entire U.S. economy was tanking. Chairman Steve Ogden questioned Rowling's argument that UTIMCO was under a contractual obligation to pay the bonuses, particularly a $1 million bonus granted to UTIMCO's chief investment officer, Bruce Zimmerman. (Only $700,000 was paid this year, with the remainder contingent on future performance.)
"He got the absolute max," Ogden said, noting that he believed the board could have considered the downturn in the economy in its decision.
Rowling acknowledged that "the world has changed" and said UTIMCO planned to review its compensation packages "going forward."
But, when Ogden asked him to return in 30 days "if you decide not to resign" with a plan for a less risk-based compensation plan, Rowling stiffly responded: "I am sure the new chairman will be willing to do that."
"Thank you for your service," Ogden said.
Ogden, as well as senators Royce West and Robert Duncan, also expressed a concern about a recent change in the UTIMCO ethics policy which allows directors to invest a small percentage in funds in which UTIMCO also holds an interest. The Finance chair urged UTIMCO to consider changes in what he sees as flawed ethics standards.
The Bryan Republican recessed the meeting by holding up a copy of today's Wall Street Journal and reading a quote from President Obama about capping the pay of executives seeking public bailouts for their companies. The public, Obama said, does not want publicly subsidized executives "rewarded for failure."
"I think that's relevant to this hearing today," he said.
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