The Investment staff of the $349 billion California Public Employees’ Retirement System (CalPERS) is recommending that the CalPERS Investment Committee reject diversity targets for corporate boards as requested by state Treasurer John Chiang, show board documents for the committee’s April 16 meeting.
Chiang, also a CalPERS Investment Committee member, had requested in November 2017 that CalPERS define a diverse board as consisting of at least 30% women. He also wanted a standard that the composition of boards be 30% diverse regarding both women and ethnic and cultural representation.
In board documents, CalPERS staff say engagement targets could be seen as “arbitrary and limiting.”
It also said that depending upon a company’s location and markets, “race and ethnic diversity definitions will vary.”
CalPERS has been a leader worldwide in pushing for the diversity of the boards of companies it owns in its global equity portfolio but has never set specific diversity requirements.
In November, Chiang said he was “shocked” by “high profile and widespread instances of sexual harassment and misconduct” that has occurred. Chiang maintained that a solution to the problem was changing the power structure of corporations by having more diverse boards.
Chiang said one study, the 2016 Deloitte Board Diversity Census, found little diversity on corporate boards. He said woman represented among Fortune 500 companies only 20% of board seats. He said the study found minorities did even worse. Chiang said only 8% of board seats were held by African-Americans, 4% by Hispanics, and 3% by Asian-Americans.
Chiang, a Democratic candidate for governor of California, was not immediately available for comment on the investment staff recommendations.Investment staff, however, is proposing one change to its corporate engagement policy, requiring corporate boards to take a leadership role in putting in place sexual harassment policies.