CalPERS Critic Left Off Investment Committee

As panel is downsized to 9 members, Margaret Brown is removed from the list. Also gone: State Treasurer Fiona Ma
Reported by Randy Diamond

The most vocal CalPERS board member is no longer on the $400 billion-plus pension system’s investment committee under a board restructuring that reduced investment committee members to nine from 13.

Margaret Brown, the California Public Employees’ Retirement System (CalPERS) board member known for her questioning of investment decisions, has been knocked off a reconstituted board investment committee.

For years, all 13 CalPERS board members were on the investment committee, but a new plan advocated by CalPERS Chief Executive Officer Marcie Frost and board President Henry Jones reduced the investment committee to nine members.

A copy of the new investment committee members, obtained by CIO, shows that Brown, State Treasurer Fiona Ma, and board member Eraina Ortega, will not be part of the new nine-member investment committee. The person who will be named to a vacant seat on the CalPERS board, to represent the state personal board, also will not join the committee.

The investment committee will retain the nine other CalPERS board members. Those members  are board president Henry Jones, board vice president Theresa Taylor, state controller Betty Yee, and Lisa Middleton, David Miller, Stacie Olivares, Jason Perez, and Ramón Rubalcava.

Brown, in an interview with CIO, said she was disappointed about the decision.

“Go-along get-along board members are likely not fulfilling their fiduciary duty,” she said.

Jones, the board president, sent a Jan. 30 memo to board members detailing the new assignments but offering no explanation as to how he determined investment committee members. Jones wasn’t immediately available to comment but a press release is expected to be released later today.

The assignments show the enhanced power Jones has as CalPERS board president since he alone is responsible for determining who gets on the investment committee and who doesn’t. Jones was unanimously re-elected to the CalPERS president’s spot for a second year by fellow board members, including Brown, on Jan. 22.

The restructuring of the investment committee, which the board approved last year, removes Brown from participating in key investment decisions at the largest US defined benefit pension plan, with more than $400 billion in assets under management.

Under the new structure, which goes into effect this month, Brown could still voice her opinion and vote against investment decisions at full board meetings. At that later stage in the game, though, Brown would have little, if any ability, to influence decisions.

Previously, since the investment committee was made up of all the board members, all investment committee decisions were final.

Jones has argued that the new structure gives investment committee decisions a second layer of scrutiny.

 The lack of a seat on the investment committee, however, deprives Brown of giving key public input during discussions of investment policies. In a surprising move, Jones’ decision also deprives Ma, the state treasurer, of voting on the investment committee, since she is not on the reformed committee either.

The state treasurer is part of the CalPERS board under state rules and, in the past, state treasurers have been active in questioning the investment staff about investment decisions. Ma could not be immediately reached for comment.

Brown has been vocal in her opposition to several key CalPERS investment projects, including the construction of a downtown Sacramento office building on land owned by the pension plan and a proposed direct-style private equity plan.

For more than a decade, CalPERS has been attempting to build an office tower in downtown Sacramento. A new plan calling for CalPERS to spent $550 million to build the tower was approved by the investment committee in 2018.

Brown was one of the three dissenting votes.

She cast her no vote after CalPERS hired a consultant who, in a confidential memo, said local real estate brokers had serious concerns about whether the proposed Class A office building could be fully rented.

In September 2019, CalPERS fired real estate firm CIM, its development partner for nine years. The pension plan then hired Hines, a real estate firm, to help develop the project.

The project has been nicknamed “the hole in the ground” by Sacramento insiders because the vacant lot where the building is supposed to rise is an ugly eyesore right in the center of downtown Sacramento, near the State Capital.

No firm plans have been announced in terms of development of the project since Hines was hired.

Brown was also one of three no votes in March when the investment committee approved two new private equity organizations. The two organizations are supposed to invest up to $10 billion each in efforts to expand CalPERS’ private equity efforts.

One organization would invest in late-stage companies in the venture capital cycle, while the other would take buy-and-hold stakes in established companies, similar to what Warren Buffett does with Berkshire Hathaway.

The plan has yet to be implemented. Brown, in casting a no vote, objected to the lack of transparency over the investment decisions by the two proposed private equity organizations.

The two investment organizations would be funded by CalPERS but run by general partners who would control investment decisions. CalPERS Chief Investment Officer Ben Meng had argued that the organizations would be more transparent than private equity funds that CalPERS normally invests in as part of its private equity program.

Brown has also been accused by fellow board members of leaking confidential information from investment committee members. Last August, she publicly denied charges that had been against her in closed session and called for the release of a confidential CalPERS report on the leaks.

The report was never made public.

Brown said the decision to leave her off to investment committee was a deliberate attempt to stifle her voice. “They don’t want someone on there who is not a rubber stamp for investment decisions,” she said.

Brown said it’s her elected duty to continue to monitor investment decisions. She said she plans to be in the audience of all investment committee meetings and will continue to speak her mind, even if it’s as an audience member.

Audience members are allowed three minutes to speak and Brown said she plans to use up all three minutes.

CalPERS spokesman Wayne Davis said Brown and the other board members who are not part of the investment committee can still participate in committee discussions even though they can’t vote. He said they can talk as long as they want and that the three-minute comment limit applied to audience members does not apply.


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California Public Employees’ Retirement System, CalPERS, Henry Jones, Margaret Brown, Warren Buffett,