Your editorial, "Governance matters," May 17, calling for the California Public Employees' Retirement System to apply its good governance activism to its own management makes some telling, important points.
Good governance is good business not only because it benefits a company and its shareholders, but also because it's the right thing to do. And it's the right thing to do whether the focus is a corporate boardroom or the hallways of CalPERS.
CalPERS has taken aggressive steps to implement policies and reforms that strengthen our accountability and ethics, and to ensure full transparency. As your editorial points out, CalPERS initiated a special review in October to examine the role of placement agents. But many months before that, we began to clamp down on their role, requiring all future external money managers to disclose their placement agent relationships, if any, and the fees paid. We asked current money managers for the same information and later publicly released the more than 600 disclosures we received.
We've worked hard to confront the issue since its earliest days. The allegations in the attorney general's recent lawsuit are very troubling. Over the past year, we've banned gifts of value to employees, created strict new procedures for communication between board members and staff, and tightened the rules regarding the filing of conflict-of-interest forms. We also adopted a policy that requires our CEO to delegate authority to negotiate and execute investment transactions to our chief investment officer.
We're now working with the state Legislature on a bill to ban the placement agent contingency fees that have been at the root of so much distress. We have a track record of reforms and actions to strengthen and toughen our standards. Like the good governance work we do in the business world, our efforts are ongoing and will never cease.
President, Board of Administration
California Public Employees' Retirement System