The newly re-elected president of the California Public Employees’ Retirement System (CalPERS), Henry Jones, says he will aim to ensure transparency in board decisions during his second one-year term.
Jones was re-elected unanimously as president by the 12 other CalPERS board members on January 22. Board member Theresa Taylor was approved unanimously as vice president.
Jones’ choice by board members comes after a bruising battle last year between him and former board member J.J. Jelincic, who was vying for Jones’ seat on the board. The battle focused on transparency, and Jelincic accused Jones of discussing CalPERS investment decisions in closed sessions instead of at open meetings.
Jones captured 66% of the vote to Jelincic’s 34%, according to CalPERS returns in October.
At the January 22 board meeting, the first of this year, Jones spoke about transparency during brief remarks after his re-election as president, according to a tape of the meeting.
“CalPERS has been a leader in advocating good governance including transparency, accountability and diversity,” Jones said. “We must have the discipline and the persistence to confront those issues as a board in the same way we expect other companies we invest in.”
CalPERS has a separate governance unit that works with companies it invests in its equity portfolio to improve corporate governance and sustainability. But the CalPERS board has been the subject of criticism over the past few years that it should be more open in its disclosures of investment decisions and policies.
The issue flared up in the Jones versus Jelincic race. Jelincic accused Jones during a debate last September at CalPERS headquarters in Sacramento of becoming “the puppet of management and not its monitor.” Jones denied the charges.
Jones’ second term as president comes at a critical time for the California pension plan. CalPERS recently exceeded more than $400 billion in assets under management, the first US state pension plan to ever hit that number.
However, CalPERS is only approximately 70% funded. If the pension plan is unable to meet its average 7% assumed rate of return in the long term, the funding level could decline. CalPERS’ own forecast shows that it’s more likely to see an average annual return of 6.2% over the next decade.
The lower returns would mean more rate hikes for the 3,000 municipalities and school districts whose workers are covered by CalPERS. Many have been unable to keep up with past CalPERS rate hikes, which are taking larger and larger portions of their budgets.
Jones has said that ensuring that CalPERS has enough money to pay benefits to workers is a major reason why he serves on the CalPERS board. He has cited accomplishments that he helped implement in recent years, such as a new asset allocation for the pension plan that puts less emphasis on equities.
Jones’ second term as CalPERS president also comes as the CalPERS board has restructured its government structure. Jones was a major proponent of the plan.
In August, the board approved major changes to its governance including reducing the number of board and committee meetings and reducing the size of the investment committee.
Jones had said that fewer meetings would give CalPERS board members more time to do due diligence on investment decisions. Several board members had expressed concerns that holding fewer CalPERS meetings would mean less oversight of the largest US defined benefit plan.
The number of board meetings in a given year will be reduced to six from nine as part of the new governance plan, and off-site retreat meetings will be reduced to one from two.
The CalPERS investment committee would meet as many as four times a year, down from 11, but it will no longer be a committee made of the whole board.
Jones and other supporters of the plan said investment decisions would get extra scrutiny since the entire CalPERS board would have to approve decisions made by the investment committee.
Several board members had argued unsuccessfully in a bid to keep the old governance structure that it was important for all board members to be involved overseeing investment matters directly as investment committee members.
Jones has served on the CalPERS board since 2008. He is a retired chief financial officer for the Los Angeles School System.
He is also the first African American CalPERS board president.
Taylor is a principal compliance representative for the California Franchise Tax Board. She is also active in state government union affairs. Taylor was elected in 2015 to serve as vice president/secretary-treasurer of the Service Employees International Union, Local 1000.