CalPERS President Loses Her Board Seat

The president of the California Public Employees’ Retirement System (CalPERS) board has been unseated by a Southern California police officer who ran an election campaign questioning the environmental, social, and governance (ESG) investment policies of the nation’s largest retirement plan.

Priya Mathur, who became the CalPERS board president in January and has been a member of the $360 billion system’s governing board for 15 years, was defeated by Jason Perez, a police officer in the Southern California community of Corona. Perez received 9,208 votes to Mathur’s 7,008, show CalPERS election results.

Perez will take his board seat in January. The 13-member CalPERS board also serves as members of the system’s powerful investment committee, which sets investment policy.

Perez, along with other members of the Corona Police Officers Association, the union representing police officers in the city of 150,000, have attended CalPERS meetings the last two years, and have been frequent critics of CalPERS’s ESG efforts. Instead, they have urged the CalPERS board to focus on making money from any legal source.

Perez criticized California State Treasurer John Chiang, a CalPERS board member, at a meeting in March 2018 over his plan to divest the retirement system from holding the stock of assault rifle retailers and wholesalers. Perez said the divestment wasn’t consistent with the board’s fiduciary duty to maximize investment returns.

The board voted 9-3 against Chiang’s proposal.

It’s unclear how much effect Perez’s election will ultimately have on CalPERS’s investments. Most of the board’s 13 members, including Chiang and state controller Betty Yee, have expressed support for continuing the system’s ESG focus. The election of Perez, however, will likely give another new CalPERS board member, Margaret Brown, an ally. Brown, who took office in January, has often been a lone dissenting voice in questioning CalPERS’s investments.

Perez’s election comes at a critical time for CalPERS. The pension system is only 71% funded and many of the member agencies that are part of the system, including the City of Corona, are facing massive increases in their payments to the retirement system.

In addition, CalPERS CEO Marcie Frost is embroiled in a controversy going back to her hiring in 2016 over whether she padded her educational background. A CalPERS press release announcing her hiring stated that she was enrolled in a public policy dual-degree bachelor and master’s program at Evergreen State College in Olympia, Washington. Evergreen has no such program. Frost, who has a high school education, stated the press release account of her educational background was a mistake. She stated that she has been fully honest about her educational background at all times.

Mathur has been one of Frost’s biggest supporters, including issuing a press release with other board members in support of the CEO. Chiang has called for an independent investigation of the issue. It’s unclear where Perez lines up on the issue. He did not address it in his statement in the CalPERS voter guidebook.

Mathur, a financial analyst for BART, a regional rail system in the San Francisco Bay Area, has been a big proponent of CalPERS ESG investment programs. She has used her CalPERS board position to travel the world, speaking at conferences and seminars on ESG. She is a member of the advisory board of the United Nations-backed Principles for Responsible Investment.

On March 8, she rang the opening bell at the London Stock Exchange  in recognition of International Women’s Day, a fact that Perez used against her in a statement in a voter booklet sent by CalPERS to eligible voters. He said in the statement, “Mathur is out of touch, believing her role is to fly around the world, ringing the bell of the London Stock Exchange, and hobnobbing with United Nations officials.”

He also said in the statement that Mathur had put CalPERS members’ retirement security at risk, “due in part to environmental, social, and governance investing priorities, regardless of the investment risk.”

While CalPERS has been considered a leader in ESG investing in the US, the system has largely advocated for ESG principles through its corporate governance program, challenging companies to have more diverse corporate boards and to be more mindful of sustainability risks in their business practices.

It is also requiring its external money managers to assess ESG risk in its investment decisions. But when it comes to actual ESG investments, CalPERS is not always in the forefront, particularly compared to some European counterparts.  Its largest asset class, for example, its $177.7 billion global equity program, has only several billion dollars invested in strategies with an ESG focus.

Mathur, in her statement in the CalPERS voter booklet, emphasized some of her ESG investing focus, including increasing long-term shareholder value by engaging corporate boards over diversity and climate change. She also cited her board role in CalPERS’s engagement with gun retailers, which she said led to Dick’s Sporting Goods and Walmart decision to cease selling assault-style weapons and accessories.

Mathur’s election to president of the CalPERS board in January was a comeback for her. In 2014, she was vice president of the CalPERS board when she was stripped of her title and other leadership positions for violating state campaign financial reporting requirements. The board acted against Mathur after the California Fair Political Practices Commission fined her $4,000 for failing to file campaign finance reports in 2012 and 2013 while running for a CalPERS seat. Mathur apologized publicly at the time but did not explain why she never filed the required financial reports.

And in 2010, she was fined $7,000 for failing to file on time her legally required statement of economic interest, listing her financial holdings for 2007 and 2008. Mathur ended up submitting the documents, but the 2007 report was 21 months late and the 2008 report was nine months late.