This content is from: Corner Office

CalPERS’ CIO Resigned in Controversy. Now the Board Is Ready to Tackle the Fallout.

CalPERS is set to hold its first public board meetings since Ben Meng’s resignation. Here’s what to expect.

The California Public Employees’ Retirement System is preparing for next week’s public board meetings, the first since chief investment officer Ben Meng resigned.   

Meng’s resignation — and the events leading up to it — have raised questions about transparency and organizational structures at the $409 billion pension fund. From September 14 through 16, CalPERS will hold seven meetings, only one of which will be closed to the public.

Some of the agenda items aim to manage the fallout from Meng’s resignation and future employees’ potential conflicts of interest.  

Early in August, complaints against Meng’s personal financial disclosures arose: first via a Naked Capitalism blog, and then via an anonymous complaint to the enforcement division of California’s Fair Political Practices Commission. Meng quickly resigned, but board members are seeking clarity on how this happened and how CalPERS will move forward.  

Leading up to next week’s meetings, board member and state controller Betty Yee requested that CalPERS add certain items to the agenda for public — rather than private — discussion.  

These included the reporting structure of the CIO to the board, the composition of the investment committee, and the governance and oversight of CalPERS. Spokespeople for Yee and CalPERS confirmed that these items had been added.  

One major change that could result from these agenda items is that the CalPERS board could gain the power to oversee investigations into allegations of misconduct by the chief executive officer, CIO, chief financial officer, general counsel, and other high-level positions. The proposal also would require management to inform the full board of an investigation.

At the performance, compensation and talent meeting, the board will consider a proposal to explore requiring the new CIO to either sell or place any securities that could pose a conflict of interest in a blind trust. According to the proposal, “this is an ideal opportunity to add such a requirement to the position,” as it is currently vacant. 

Also at that September 16 meeting, the board will review CEO Marcie Frost’s bonus for fiscal 2019 through 2020. 

“That also might be rather interesting given the fact that a number of the board members are very unhappy with the way this was handled,” board member Margaret Brown said Wednesday by phone.

[II Deep Dive: The Crucifixion of Ben Meng]

CalPERS will also hold an investment committee meeting next week. At the meeting, the board will discuss results for the quarter ending June 30. According to meeting documents, the public employees’ retirement fund’s net return was 4.7 percent for the year through June 30. 

Fixed income posted the highest return during that period — 12.5 percent over the same period. Private equity was the worst-performing asset class, losing 5.1 percent.  

A spokesperson for CalPERS declined to comment beyond the meeting agenda.  

Related Content