No freebies at these funds
Kudos to Steve Hemmerick for his Feb. 23 Editorial Page column, "Trustees: No more freebies."
Several years ago I adopted a rule prohibiting my staff and myself from accepting gifts and gratuities from vendors or potential vendors of financial services. Two of our three public employee retirement boards have done the same, and the Legislature recently imposed the same high standard on the teachers' system board.
As public officials, trustees of governmental pension plans must assure society that their decisions are made in the interests of the system's members and taxpayers, not because they were treated to a trip or received some personal benefit.
I urge all public retirement system trustees and administrators to adhere to this appropriately high standard.
James H. Douglas
State of Vermont
No ethical vanguard
Steve Hemmerick is right, public pension funds should stop accepting "freebies." In his Feb. 23 Editorial Page column, he also points out, correctly, that the California Public Employees' Retirement System shouldn't be expected to earn more than the S&P 500. However, that cheap shot by the Los Angeles Times shouldn't obscure what is going on at CalPERS.
"There has been no evidence or even suspicion of corruption by any CalPERS fiduciaries because of political contributions or gifts," President William Crist announced in a recent press release. "Nevertheless, we have taken the extreme measure of banning political contributions and requiring the fullest disclosure possible (of gifts)." Another board member was quoted saying, "The new policies elevate CalPERS from the middle of the pack to the vanguard of ethical conduct and public disclosure in government."
It's ironic that CalPERS has been such an effective leader in the area of corporate governance, yet its own board seems to deviate so clearly from the high principles of independence and absence of conflicts of interest they seek in others. The recent action to ban political contributions and report gifts were only taken after CalPERS came under siege from the press, FBI, and Legislature. Deals involving relatives and former board members, the personal bankruptcies of the chairman of the investment committee, gifts, high living, extensive travel, campaign contributions funded by those doing business with CalPERS -- these and other disclosures should not be discounted.
Do the recent measures adopted by CalPERS really put them in the ethical vanguard? I doubt it. First, California Government Code, section 11340.5(a) provides that policies adopted by agencies, such as CalPERS, aren't enforceable unless adopted as regulations. The CalPERS policies were not.
Second, a cynic might believe the majority of the board imposed a solution to appease critics, but which has no real impact on them. Treasurer Matt Fong, for example, is running for U.S. Senate. Under the new CalPERS policy, he can't raise any campaign contributions from those who do business with CalPERS. His opponents, however, are under no such restriction.
The campaign contribution language impacts only the state treasurer and the state controller. Board members elected by CalPERS members traditionally have modest campaigns, funded by friends and employee organizations. Other board members are appointed by elected officials who do not come under the new restrictions. So, the only new policy which impacts most board members is the requirement to report gifts.
But are the Gifts Legal? Section 19990(f) of the California Government Code prohibits state officers or employees from receiving any gift from those they do business with if "it reasonably could be substantiated that the gift was intended to influence the officer or employee in his or her official duties." Case law shows that an Alcohol Beverage Control official was disciplined for accepting a free drink from a bartender; CalPERS officials routinely accept gifts of much higher value, such as expensive junkets. Wouldn't most such gifts be "intended to influence?"
It is not clear what authority has allowed CalPERS board members and staff to accept gifts. Now, the new policy says the System's "fiduciaries" must report them. It will be interesting to see who reports the next first class trip with all expenses paid by a CalPERS contractor. The new policy may make it easier to collect the evidence and show the conflicts of interest that could easily be avoided if CalPERS took the good advice offered by your editorial.
e-mail: [email protected]
Lift salary cap
I couldn't agree more with the editorial in the Feb. 9 issue of Pensions & Investments on why Congress should "Lift the salary cap" on the maximum salary a plan sponsor can take into account when making pension contributions for employees.
The current limits on salaries (and benefits) are having the opposite of their intended effect. Instead of limiting the benefits of senior executives and other high-paid employees, they are serving to limit the benefits provided for middle management and rank and file employees!
This comes about because companies have been forced because of low salary limits to find ways to provide benefits for executives outside of qualified pension programs. This has served to weaken the qualified pension system, particularly defined benefit plans.
Thanks for speaking out on this timely and important subject. I hope Congress is listening!
Daryle G. Johnson
Executive vice president,
Pacific Life Insurance Co.
Newport Beach, Calif.
The Feb. 23 Pensions & Investments' article titled "The names that made corporate governance" (page 30) is conspicuously missing Sarah Teslik's picture. Not only would she add beauty to an otherwise drab picture of a bunch of older guys (like me), but she has done more to advance corporate governance than all of them put together. Nothing would have happened without the energy and drive to organize the public and Taft-Hartley pension funds to do what they should have been doing all along.
In the early days it was not in any one fund's interest to stick its head out and spend countless hours and dollars on something that is a classic social good, but with modest payoff to any one fund except for the very largest. Not only was she the unseen effort behind the earliest organizational efforts of the Council of Institutional Investors, but upon becoming that organization's first -- and so far only -- executive director, she was responsible for avoiding the million ways the entire effort could have failed and finding the one way it could succeed beyond anyone's wildest imagination.
Many people, including the important efforts of those you cite in your article, have helped to assure the fundamental idea that shareholders are the owners of public corporations. Sarah's role was critical, and deserves recognition by all shareholders.
State Universities Retirement System
Editor's note: Sarah Teslik was contacted for the story, but did not return phone calls from Pensions & Investments.