While the most controversial section of a proposed code of conduct for California Public Employees’ Retirement System (CalPERS) board members has been removed, the debate still continues over free speech issues.
When the code of conduct was first presented to the 13-member CalPERS board July 17, it contained a clause stating, “when action is taken by [the] committee or the full board, all board members will support the actions regardless of their individual vote on the policy.”
A new draft sent to the board July 26 did not contain the controversial provision.
Board member Jason Perez, one of several CalPERS board members who had asked that the clause be removed, told CIO he was satisfied with the change.
“On review of the draft, they removed that part of the document,” he said in an email.
The code of conduct is scheduled to be voted on by the CalPERS board governance committee on August 20. It would be the first vote on the matter. Ultimately, the code of conduct would need to be approved by the full CalPERS board.
Two other critics of the draft policy, current CalPERS board member Margaret Brown and former CalPERS board member J.J. Jelincic, say portions of the revised code of conduct are so vague that they still could result in stifling dissent and preventing CalPERS board members from talking to the media.
Jelincic is running in an election, which will be decided in the fall, to regain a seat on the board. His opponent is board president Henry Jones.
Brown said she was particularly concerned about several provisions in the revised draft code. One states that “Board Members understand that they are representing CalPERS in and outside of committee and board meetings, Board Members will be truthful and use accurate characterizations in all platforms when making statements about CalPERS and its decisions and services.”
Another says that “Board Members shall communicate accurate and reliable information about CalPERS policy decisions to strengthen the understanding for beneficiaries, stakeholders, and the public.”
Brown says the clauses are too vague.
“A lot of this seems subject to interpretation and that’s where the risk is here because if you’re not in the majority of board members, they could say almost anything you do is unethical or causes reputational damage.”
Jelincic said the new code is an improvement.
“Going from terrible to just very bad is progress,” he said.
Jelincic said the problem is the code is too unclear.
“The proposal is subjective and therefore will be selectively enforced,” he said. “It is designed to hide bad conduct, not prevent it. It is about reputation. Avoiding bad press is the goal. Bad conduct is seen as damaging only if it is exposed.”
Board member Theresa Taylor is among the majority of board members who support the code of conduct.
“We need to be collaboratively working together and not undermining CalPERS and the board,” she told CIO.
Taylor said CalPERS’s reputation is important to the fund’s investment success. “If we use the press to air grievances then I do believe we have a problem,” she said.
Taylor said leaks to the press in past months seem to be coming from board members. She said a CalPERS internal investigation pinpointed that fact, but was not able to show with 100% accuracy which board members were leaking.
Taylor said not only is the code of conduct important, it must also include penalties for board members who violate the code, including leaking closed-door board meeting material to the press.
The draft code has heightened conflict at board meetings. Several witnesses at the July 17 CalPERS meeting said before the start of the meeting that Brown repeatedly confronted CalPERS Chief Executive Officer Marcie Frost for producing the draft code of conduct just minutes before the start of the meeting.
Jones has been one of the code’s biggest supporters, but told CIO that the proper place to discuss the matter is at the board’s governance committee meeting on August 20.
He said board meetings and board committee meetings are the place where differing views can be heard, even after decisions have been made by the CalPERS board.
“If you have a difference of opinion, the proper place to express those differences is at the board meetings,” he said.
After the first draft of the code of conduct was released, Jones said he favored the clause that called on CalPERS board members to support investment policy decisions of the entire board, even if they had opposed the action.
Jones would not discuss the removal of that clause. He said the revised code of conduct could change again as board members converse about the matter at the governance committee meeting, so any discussion would be premature.