California Treasurer John Chiang is calling on CalPERS and CalSTRS to put pressure on corporate boards of the companies they invest in to meet a diversity standard of 30% women and 30% diverse representation in terms of sexual orientation and cultural and ethnic composition.
Mr. Chiang, in a letter Tuesday to Henry Jones, investment committee chairman of Sacramento-based CalPERS, and Harry Keiley, investment committee chairman of West Sacramento-based CalSTRS, called on the committees to approve the "30 and 30" goal in the spring of 2018 with the aim that companies would implement the practices by the 2019 proxy season.
The letter goes on to say that the pension systems should make it clear to companies that if they are not progressing towards the "30 and 30" board diversity, CalPERS and CAlSTRS "will consider witholding its proxy votes or cast no votes for all board members."
Mr. Chiang, who sits on the investment committees of the $344.4 billion California Public Employees' Retirement System and $219.6 billion California State Teachers' Retirement System, said he was "shocked" by "high profile and widespread instances of sexual harassment and misconduct" that has occurred "from Hollywood to Washington." He said that a "transformative and lasting answer" to the problem, is "fundamentally changing the power structure at the top of our institutions."
"The only way to change the status quo that leads people in power to think its OK to grope, bully and abuse is to change the power structure in corporate America by putting more women and minorities on board of directors," he went on. "As powerful players in corporate investments, we must mount a strong and clear advocacy campaign to greatly increase corporate board membership diversity."
Mr. Chiang said cited one study, the 2016 Deloitte Board Diversity Census, which that found only 20% of board seats of Fortune 500 corporations were filled by women, 8% by African-Americans, 4% by Hispanics and 3% by Asian-Americans.
Messrs. Jones and Keiley did not immediately respond to requests for comment. Mr. Chiang was unavailable for comment, said his spokesman Marc Lifsher.
Both pension funds have been leading advocates for diversity on corporate boards, using their investments in most publicly traded companies through their use of index funds as a license to engage companies on a variety of environmental, social and governance issues.
But Mr. Lifsher said neither plan has specific guidelines on the composition of board members.