The Chairman and the Bonus

So, yesterday Carolyn Y. Smith, the official at the center of the SEDC bonuses scandal, and Artie “Chip” Owen, chairman of SEDC’s board, fired off a memo to all the members of the SEDC board and certain city officials in response to my story.

One point in the memo jumped out at me, Owen and Smith write:

In 1994, the SEDC Board of Directors delegated the details of SEDC’s president’s compensation to the Chair of the Board of Directors.

It’s difficult to ascertain exactly what that means. I’m not sure whether it means the board of directors delegated just the setting of the president’s salary to the board’s chairperson, or whether the chairperson was made responsible for setting all of the president’s compensation, including, presumably, the tens of thousands of dollars Smith received in bonuses over the last two years for which records are available.

I have called SEDC, but no one answers the phone for me over there any more. I have also called Owen several times today. No answer.

Either way, the fact that Owen is currently unilaterally responsible for setting Smith’s compensation is really interesting. Owen, who is a businessman and has been chairman of SEDC’s board since February 2007, has been embroiled in a controversial project in Valencia Park that we’ve been following, Valencia Business Park.

A refresher: As of the last time we spoke to him, Owen had an ongoing business relationship with the two principals that run a Pacific Development Partners, who recently won the rights to develop Valencia Business Park. Owen receives tens of thousands of dollars annually from PDP, according to statements of economic interest, and has told us that he has an ongoing business relationship with PDP’s two principal partners.

Owen has recused himself from any board meetings in which the Valencia Business Park deal is discussed. But this new controversy essentially places him in the position of defending Smith, who in turn has a lot of say over which developers are chosen for SEDC projects.

At the same time, if Owen really does have the responsibility for Smith’s compensation, including approving tens of thousands of dollars in bonuses for her, then that’s possibly a serious conflict of interest, said Robert Fellmeth, professor of public interest law at the University of San Diego.

“It’s bad policy for the chair to put himself in this position,” Fellmeth said. “I think if I was in his position I would be recusing myself from the bonus decisions.”

To try and shed some light on what the chair of SEDC’s board does, in terms of setting the president’s compensation, I called Sharon Whitehurst-Payne. She’s a current SEDC board member and she used to be the board’s chairwoman.

I asked Whitehurst-Payne how involved she was in setting Smith’s compensation when she chaired the board, and what Smith and Owen’s memo means when it says that the board chair is responsible for “the details of SEDC’s President’s compensation.”

“I don’t know what that means,” she said.

Pressed on whether she was ever asked to sign off on or otherwise approve the president’s bonuses, Whitehurst-Payne said she didn’t recall.

“Just leave me out of it. I can’t shed any light on this,” she said.

— WILL CARLESS