Bike: 1988 Trek 360
Problem: Stem will not tighten securely in steer tube

No matter how I try to tighten the compression bolt in this Cinelli stem, the stem does not stay tight in the steer tube, and even when the bolt is tightened to feeling on the verge of stripping out, the bars can still be pulled from side to side with a little force if I am holding the wheel straight while pulling. Nothing appears damaged on any of these parts, but I've only dealt with the "wedge" type compression bolts in the past so maybe I am doing something wrong? Also, the steertube seems to have some sort of a shim, or an area where the diameter narrows towards the bottom of the tube, does this have something to do with my problem? I do not have a set of calipers, but as far as I can tell using a ruler, the OD of the stem and the ID of the steer tube are compatible.