CalSTRS Compensation Committee approves incentive increases to align statutory positions with market

The California State Teachers Retirement System Compensation Committee voted to adopt Alternative A to increase maximum annual incentive opportunities for statutory positions in order to align total cash compensation with the market median, the committee announced after a roll-call vote.

Kristel Turko, CalSTRS staff, told the committee that “staff recommend the selection of a proposed alternative and approval of the corresponding incentive opportunity adjustments for these statutory positions based on the benchmarking.” Mercer consultants had presented three alternatives (A, B and C) after reviewing McLagan survey data and CalSTRS’ policy targets.

The committee’s decision implements the consultant recommendation that most statutory roles be moved toward the market midpoint. Mercer noted the largest gaps were among senior investment roles: “that role is the furthest off of market, is 75% off of market of base salary,” a consultant said, explaining why larger incentive adjustments were necessary for some investment positions. The consultants and staff also proposed adding the statutory general counsel to the incentive plan; staff said inclusion would avoid inflating base salary and would better align the role with peers that tie part of pay to performance.

Committee members discussed trade-offs between strictly following the board’s compensation policy and taking a broader talent strategy. Ms. Perrault, Director of Finance, cautioned that the general counsel role has never had incentives historically but added the position’s investment-related work can justify inclusion on metrics that combine total fund performance with individual measures. Ms. Gallegos, representing the State Controller’s office, asked how this work fits with an ongoing broader compensation review; staff replied that initial ideas could surface within a month but meaningful policy changes would likely take longer and that the McLagan data used were collected as of April.

Ms. Hendricks, a committee member, moved to adopt Alternative A; Mr. Tang seconded. There were no public speakers on the item. Roll-call votes recorded in the transcript included Ms. Perrault — abstain; Ms. Gallegos — no; Mr. Tang — yes; Mr. Gunning — abstain; Mr. Juarez — aye; Chairperson Keiley — aye. The chair announced the motion passes. Staff said approved changes would be incorporated into compensation policy administrative procedures and communicated to impacted employees.

The committee noted implementation details: Mercer and staff said the incentive structure would be effective July 1, 2026, with the first incentive payments made in fall 2027. Members also asked staff to return to the committee (and the full board if appropriate) if CalSTRS later restores or fills a deputy CIO position so the incentive limits for that role can be revisited.

The committee approved the minutes from the prior Compensation Committee meeting, identified the deputy CIO as a topic for future review, and adjourned; the TRB session was scheduled to begin at 1 p.m.