CalPERS is weighing boosting annual and long-term incentive pay for its top investment and operations team members, including its chief investment officer and chief executive officer.
Currently, the CEO has a target annual incentive award of 27% and a long-term incentive, also 27%, of base pay, according to a revised compensation policy adopted Tuesday by the board of the $457.4 billion California Public Employees' Retirement System, Sacramento.
In a report to CalPERS' talent committee Monday, the board's primary compensation consultant, Global Governance Advisors, said there is a gap in compensation between CalPERS executives and a peer group that includes U.S. and Canadian public pension plans, California agencies and private companies such as money managers, banks and insurance companies. GGA found that the pay gap was mostly due to lower-than-market annual and long-term incentive pay. Market pay comparisons were based on 2021 compensation data. CalPERS consultants told the committee that 2021 was an exceptional pay year and that market comparisons based on 2022 and 2023 would most likely be lower.
CalPERS' CEO total potential compensation is 66% below the peer groups, while the CIO's total compensation is 37% below market. The CIO's target annual and long-term incentives are both 100% of base pay.
However, GGA found that the CEO and CIO base pay was in line with the peer group. The CEO's base pay range is $377,250 to $628,750 and the CIO's base pay range is $424,500 to $707,500. GGA reported that the CEO's midpoint base salary is 1% above market and the CIO's midpoint base salary is 2% below market.
GGA is expected to bring back recommendations in April on policy changes to boost CalPERS' incentive programs.
Separately, the board voted to review the authority it delegates to the CEO and its committees every two years rather than on an annual basis. GGA is also expected to gather feedback from talent committee members on whether CalPERS' private company employee compensation should be included in the market comparisons for non-investment employees.