Huge pay bonus despite $10bn loss

But instead of being punished for this effort, he was rewarded handsomely. Bonuses paid to Mr Pascoe on top of his regular salary last year catapulted him to a new status: Victoria's first million-dollar public servant.

The latest annual report of the Victorian Funds Management Corporation, tabled in Parliament yesterday, reveals a senior executive believed to be Mr Pascoe was paid between $1 million and $1.099 million in the 12 months to June 30.

He was one of six executives at the corporation who shared in more than $1.2 million in pay bonuses in the financial year just gone. Yet in the two years to June 30 this year, the funds they were overseeing crashed in value from $41.3 billion to $31.1 billion in the face of the global financial crisis.

The revelations have prompted an embarrassed Premier John Brumby into ordering former top bureaucrat Michael Vertigan to head an investigation into the bonus payments.

After the Opposition seized on the issue in question time yesterday, Mr Brumby said Victorians would look "dimly" on bonuses paid when performance had been poor.

"The investment returns of the VFMC last year don't warrant excessive performance bonus payments," Mr Brumby said. "Neither the Treasurer nor myself will condone a compensation scheme that rewards underperformance."

Shadow treasurer Kim Wells said VFMC "fat cats" had been feathering their nests with huge salary bonuses when they should be punished for shocking results. "It's time John Brumby came clean with Victorians and accepted responsibility for these shocking losses and the massive rewards to VFMC executives," he said.

The VFMC manages the retirement saving of thousands of state employees, including emergency service workers and MPs. According to the annual report, the corporation's 13.7 per cent loss on investments last year was below industry benchmarks. Yet base executive salaries increased 42 per cent.

After learning of the bonus payments last Friday, Treasurer John Lenders phoned VFMC chairman John Fraser for what the Premier described as a "frank conversation".

VFMC spokeswoman Deb Johnson said the investment performance was challenged by the global crisis and the $5.9 billion loss over the last financial year included more than $1 billion in client withdrawals.

Among the considerations of Mr Vertigan's inquiry will be whether the bonuses should be repaid.