STUMP » Articles » Calpers Quickie: President Pushed off the Board Due to ESG Over Pension Security » 8 October 2018, 11:09

Where Stu & MP spout off about everything.

Calpers Quickie: President Pushed off the Board Due to ESG Over Pension Security  

by

8 October 2018, 11:09

Well, this certainly is interesting. And yes, I put on my own slant.

Let’s go to the boring industry publication for the basic story:

CalPERS President Loses Her Board Seat

The president of the California Public Employees’ Retirement System (CalPERS) board has been unseated by a Southern California police officer who ran an election campaign questioning the environmental, social, and governance (ESG) investment policies of the nation’s largest retirement plan.

Priya Mathur, who became the CalPERS board president in January and has been a member of the $360 billion system’s governing board for 15 years, was defeated by Jason Perez, a police officer in the Southern California community of Corona. Perez received 9,208 votes to Mathur’s 7,008, show CalPERS election results.

Perez will take his board seat in January. The 13-member CalPERS board also serves as members of the system’s powerful investment committee, which sets investment policy.

Perez, along with other members of the Corona Police Officers Association, the union representing police officers in the city of 150,000, have attended CalPERS meetings the last two years, and have been frequent critics of CalPERS’s ESG efforts. Instead, they have urged the CalPERS board to focus on making money from any legal source.

Perez criticized California State Treasurer John Chiang, a CalPERS board member, at a meeting in March 2018 over his plan to divest the retirement system from holding the stock of assault rifle retailers and wholesalers. Perez said the divestment wasn’t consistent with the board’s fiduciary duty to maximize investment returns.

Let’s ignore that “AR” in “AR-15” does not mean “assault rifle”. It just originally came from the company name ArmaLite, which originally developed the model.

But ignoring that, police offices may not find AR-15s all that scary. They are used for all sorts of purposes, and, obviously, mostly used to stuff like target practice and hunting. So vilifying guns doesn’t come off well to cops.

It’s unclear how much effect Perez’s election will ultimately have on CalPERS’s investments. Most of the board’s 13 members, including Chiang and state controller Betty Yee, have expressed support for continuing the system’s ESG focus. The election of Perez, however, will likely give another new CalPERS board member, Margaret Brown, an ally. Brown, who took office in January, has often been a lone dissenting voice in questioning CalPERS’s investments.

Perez’s election comes at a critical time for CalPERS. The pension system is only 71% funded and many of the member agencies that are part of the system, including the City of Corona, are facing massive increases in their payments to the retirement system.

In addition, CalPERS CEO Marcie Frost is embroiled in a controversy going back to her hiring in 2016 over whether she padded her educational background. A CalPERS press release announcing her hiring stated that she was enrolled in a public policy dual-degree bachelor and master’s program at Evergreen State College in Olympia, Washington. Evergreen has no such program. Frost, who has a high school education, stated the press release account of her educational background was a mistake. She stated that she has been fully honest about her educational background at all times.

Mathur has been one of Frost’s biggest supporters, including issuing a press release with other board members in support of the CEO. Chiang has called for an independent investigation of the issue. It’s unclear where Perez lines up on the issue. He did not address it in his statement in the CalPERS voter guidebook.

That’s because Marcie Frost is small beans in relation to the bigger issue of using political criteria for picking pension investments.

Mathur, a financial analyst for BART, a regional rail system in the San Francisco Bay Area, has been a big proponent of CalPERS ESG investment programs. She has used her CalPERS board position to travel the world, speaking at conferences and seminars on ESG. She is a member of the advisory board of the United Nations-backed Principles for Responsible Investment.

In this post, I’m not going to talk about PRI, which had a conference a little bit ago (and I was reading press releases coming out of it), but here’s the question: what does Calpers get from Mathur going to ESG conferences?

Perez made that point.

On March 8, she rang the opening bell at the London Stock Exchange in recognition of International Women’s Day, a fact that Perez used against her in a statement in a voter booklet sent by CalPERS to eligible voters. He said in the statement, “Mathur is out of touch, believing her role is to fly around the world, ringing the bell of the London Stock Exchange, and hobnobbing with United Nations officials.”

He also said in the statement that Mathur had put CalPERS members’ retirement security at risk, “due in part to environmental, social, and governance investing priorities, regardless of the investment risk.”

So this is what Mathur had to say:

Mathur, in her statement in the CalPERS voter booklet, emphasized some of her ESG investing focus, including increasing long-term shareholder value by engaging corporate boards over diversity and climate change. She also cited her board role in CalPERS’s engagement with gun retailers, which she said led to Dick’s Sporting Goods and Walmart decision to cease selling assault-style weapons and accessories.

Again, they’re just talking about ordinary hunting rifles and hunting accessories, but whatever.

So…. how did that enhance their returns? (and isn’t Walmart still selling guns? Yes, they’re selling guns to those 21 and older. There’s some court cases out there about this, I think, because legal adults can buy guns… are stores allowed to restrict legal buyers of a product from buying it?)

But again, let’s get away from that. I would love to hear about how engaging corporate boards re: diversity and climate change has improved Calpers’ financial position.

More on Mathur:

Mathur’s election to president of the CalPERS board in January was a comeback for her. In 2014, she was vice president of the CalPERS board when she was stripped of her title and other leadership positions for violating state campaign financial reporting requirements. The board acted against Mathur after the California Fair Political Practices Commission fined her $4,000 for failing to file campaign finance reports in 2012 and 2013 while running for a CalPERS seat. Mathur apologized publicly at the time but did not explain why she never filed the required financial reports.

And in 2010, she was fined $7,000 for failing to file on time her legally required statement of economic interest, listing her financial holdings for 2007 and 2008. Mathur ended up submitting the documents, but the 2007 report was 21 months late and the 2008 report was nine months late.

Remember, this is in ai-CIO, my usual “boring” source on institutional investing.

Wait til I get to the opinionated folks.

YVES SMITH IS HAPPY

From naked capitalism: Earthquake in Sacramento: Insurgent CalPERS Candidate Jason Perez Trounced Board President Priya Mathur in 57% to 43% Win; Repudiation of Captured Board and Labor Leaders

Do I really need to quote this to let you see Yves Smith’s glee?

Oh, all right.

Last year, CalPERS insiders no doubt tried to rationalize Margaret Brown’s victory over long-standing board member and former CSEA president Michael Bilbrey as a fluke. On the board, Bilbery gave a very convincing imitation of a potted plant. Brown made Bilbery’s “missing while present” status as a board member who almost never spoke into a campaign issue. She had also won the endorsement of key retiree organizations, whose members have a high propensity to vote. Brown beat Bilbrey by 53% to 47%.

Jason Perez’s defeat of high-profile board president Priya Mathur is an even more forceful blow to business as usual at CalPERS. This election was for the public agency local government employees board seat, so only current employees were eligible to vote. That should have given the unions more sway than for the “all member” seat that Brown successfully contested last year.

…..

Mathur was so fixated on ESG issues that, in combination with her traveling around the world on a frequent basis to speak at and participate in ESG conferences, it looked like she was positioning herself for future career opportunities at the expense of CalPERS beneficiaries. And her considerable charm and her leadership on key committees appears to have had the effect of the board as a whole similarly spending too much time on ESG at the cost of other investment topics.

…..
I hope you’ll all wish Perez success in his new role!

Best wishes, Perez!

CLEAN UP BEFORE DISASTER

My main comment on this particular Calpers brou-ha-ha is that sometimes it takes people losing multiple times before they get the message. There are issues at Calpers, and I don’t mean in terms of internal operations (I have no insight there).

Looking at the numbers from the outside, whenever the next recession/market downturn occurs, Calpers is going to need a lot of credibility. Having the various rinky-dink crap (I didn’t know about Mathur’s sketchy election history – that doesn’t help) bubbling around, I cannot take them seriously as a professional outfit.

The rinky dink crap is an indicator to me that they will not be able to handle bad news, period. And even with relatively good markets, there’s bad news a-coming to the various communities seeing increased contribution rates to try to make up for years of too-bright valuation assumptions.

OTHER NEWS AND COMMENTARY

I want to go back to something Perez said, that was quoted to make him look bad, as Yves Smith wrote.

Perez was a first-time candidate who said when he launched his campaign that he wanted to run because he was worried about the $360 billion pension fund, and “I’m selfish; I want to retire.” At a debate, he said he wanted the pension fund to focus on maximizing returns from its investments.

Thing is, if you’re a fellow pension participant, but not yet retired. Heck, if you’re a retired worker — you also want the pension you were promised. You want to retire.

Now, that quote may not look good to the California taxpayer… but the California taxpayer didn’t vote in this election. Current Calpers participants did.

And they want their retirement promises fulfilled. Some may be a bit cavalier, thinking that the taxpayers will make up for investment losses if Calpers gets a bit faddish in their investments. “Hey — everybody’s doing ESG! Pleeeeease make us whole!”

But others realize that their best bet for retirement security is having their pension funds being invested with one goal in mind: security of the pension funds. Not scoring political points or going to popular conferences and looking good for the Davos audience.


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