I never get tired of stories about the California Public Employees’ Retirement System. The largest pension system in the U.S. is working on an ambitious plan to create two direct investment funds focused on late-stage venture and long-hold investments. The two funds would be run by outside experts rather than in-house CalPERS professionals.
We learned recently that potential candidates to run CalPERS’s two direct funds decided to back out of the process after news of their potential hiring was leaked to Bloomberg. CalPERS board president Henry Jones divulged this info publicly in early August.
It’s interesting that as CalPERS moves through this process, the system recently held a discussion at an offsite meeting about a code of conduct that would seek to control board members’ ability to communicate about board decisions.
CalPERS’s governance committee is scheduled to vote on the code on Aug. 20, according to Chief Investment Officer magazine. The draft code seems to be focused on protecting CalPERS reputation and controlling board members’ language about board decisions.
An extremely controversial sentence was removed from a draft of one section of the code that I like to describe as Orwellian: “When action is taken by a committee or the full board, all board members will support the action regardless of their individual vote on the policy.”
The remaining language in the section reads: “Board members shall communicate accurate and reliable information about CalPERS policy decisions to strengthen the understanding for beneficiaries, stakeholders and the public. Board members will not allow personal bias, conflicts of interest or the influence of other people to override their trustee responsibilities.”
Other parts of the code read: “Board Members understand that they are representing CalPERS in and outside of committee and board meetings, Board Members will be truthful and use accurate characterizations in all platforms when making statements about CalPERS and its decisions and services.”
Another says that “Board Members shall communicate accurate and reliable information about CalPERS policy decisions to strengthen the understanding for beneficiaries, stakeholders, and the public,” according to CIO.
Rather than restrict communications, CalPERS should be communicating more about the status and particulars of its private equity plan. Who is involved, how will it work, what investments is it making and why, what are the terms of such deals and why do they best serve the system’s beneficiaries and taxpayers? All such details should be readily available for scrutiny and not secreted away in closed session.
Instead of playing this political game with confidentiality and secrets, just open the process up and let everyone understand why this is the right path for the large pension in the U.S.