Pension Legislation Strengthens CalPERS CFO Position

(October 13, 2011) – California Gov. Jerry Brown has signed legislation that strengthens the chief financial officer position at the $217.1 billion Sacramento-based California Public Employees’ Retirement System (CalPERS).

“These new laws allow CalPERS to continue to apply newer and higher standards of accountability, integrity, and openness to ensure public trust in our institution,” Anne Stausboll, CalPERS CEO, said in a statement. Furthermore, the legislation will encourage the formation of timelines for when board members and some staff members at both CalPERS and CalSTRS can move to certain other jobs, Stausboll explained.

The legislation will become law on January 1, 2012, the statement from the fund revealed.

In addition, as outlined in the release, the pension legislation “prohibits CalPERS and CalSTRS Board Members and executive employees from representing another entity before the pension funds to influence specified actions for a period of four years after leaving service.” Furthermore, the legislation prohibits those individuals from aiding, advising, consulting with, or assisting a business entity for two years after leaving service, in obtaining the award of, or in negotiating, a contract or contract amendment with CalPERS or CalSTRS. Among the new restrictions board members and staff at CalPERS and the California State Teachers’ Retirement System (CalSTRS) are subject to is also a 10-year moratorium on the acceptance of jobs as placement agents.

Stausboll added: “In the increasingly complex world of finance and investment, trust is critical. We have faced many issues squarely over the last few years to demonstrate that we are worthy of the trust that all Californians have placed in us. Our experiences will serve as a reminder that ethics and core values are mere words unless translated into consistent ethical conduct as we go about our important work.”

In March, CalPERS appointed Russell Fong as acting CFO, creating the fund’s newest executive-level position. The fund noted that Fong would be responsible for managing the financial processes for CalPERS, including budgeting, accounting, cash management, and financial planning and analysis.

“The new position is part of our executive office and board’s values to adhere to our core mission,” CalPERS spokesperson Bill Madison told aiCIO in March. “Russell is an excellent fit because of his background in accounting, budgeting, and IT management,” he said, noting that the role is purely administrative and not investment-related. “He’ll help us answer questions like ‘What are our budget requirements for the next two, three, and five years?’ and ‘How can we make the best use of those funds to reach our goals?'”

When asked whether issues of bribery and corruption arising from placement agent activity propelled the creation of the CFO role, Madison replied that conflicts of interest undoubtedly emphasized the need for greater transparency. “In the last year, our executives got input from 2,300-plus employees and staff on what their core values are, and we established six of them: openness, quality, respect, accountability, integrity, and balance,” Madison said. “Those are our guiding behaviors,” he explained, noting that the new appointment reflects the fund’s efforts to improve its internal fiscal management and budgeting clearly, openly, and efficiently, with Fong being the single point of coordination for the scheme’s financial risk.

Click here to read an aiCIO exclusive interview with two of the most influential chief investment officers in America – Chris Ailman of CalSTRS and Joe Dear of CalPERS.