CalPERS board added a process to its policy governing misconduct by senior executives that is similar to the informal process that has been used by CEO Marcie Frost.
The governance policy change was raised last year after the August resigniation of former CIO Yu "Ben" Meng in the wake of disclosure filings showing he invested in shares of private equity managers with which CalPERS had invested in the past.
At the time, board members of the $439.5 billion California Public Employees' Retirement System, Sacramento, said that the board should be given an oversight role concerning misconduct allegations against top executives, including the CIO and CEO.
Ms. Frost said in an interview last year with Pensions & Investments that her practice is to inform the board president and the heads of the investment and a personnel committees about investigations into misconduct allegations.
The new governance policy, adopted Wednesday, concerns misconduct allegations against the CEO, CIO, chief actuary, chief compliance officer, chief financial officer, chief health director, chief operating officer or general counsel.
Once the misconduct claim is deemed to be a "plausible, non-frivolous," and a preliminary determination is completed, that, if substantiated, the allegation would constitute misconduct. The CEO would then notify the board president and the chairman of the risk and audit committee of the misconduct allegations. Although it is not spelled out in the governance policy, Matthew G. Jacobs, CalPERS general counsel, said that the CEO, with the assistance of the general counsel, would make the determination whether the allegation is severe enough to trigger notification of the board president, and risk and audit committee chairman.
The board will be notified if a formal investigation is launched, the new policy said. The board also added that board members need to keep misconduct allegations confidential and shall not interfere with the investigation.
Separately, the board in April is expected to vote on the board's delegations of authority to its committees. At that time, the board will decide whether the board should delegate its shared responsibility with the CEO for CIO personnel decisions to the performance, compensation and talent management committee or retain that responsibility with the full board. The board is expected to signify its decision by its vote on a revised talent committee delegation of authority that would delegate the responsibility over CIO personnel decisions to the committee.
Also, on Monday, the investment committee voted to maintain CalPERS current divestments from tobacco; companies that sell firearms that are illegal for private ownership in California; companies with specified business operations in Iran and Sudan; and companies that generate 50% or more of their income from the mining of thermal coal.
