State Treasurer Calls for Investigation into CalPERS CEO’s Hiring

Board approves 4% raise, $84,873 bonus, but controversy continues over Frost’s educational credentials.

The board of the California Public Employees’ Retirement System (CalPERS) has approved a 4% raise for CEO Marcie Frost, bringing her salary to $330,720, in addition to giving her a $84,873 bonus. But a controversy over whether Frost misrepresented her educational credentials continues, with state Treasurer John Chiang calling for an independent investigation.

Frost was hired by CalPERS in 2016 and given the job of running the largest US pension plan even though she only had a high school education. Chiang, who sits on the CalPERS board, said he wants the investigation to determine what information Frost submitted about her educational background beyond high school.

The controversy began a month ago when the news blog Naked Capitalism declared that a July 16, 2016, press release issued by CalPERS at the time of Frost’s hiring contained false information. The CalPERS press release said that Frost was enrolled in a dual bachelor’s-master’s program in public policy at Evergreen State College in Olympia, Washington.

Evergreen College officials disclosed that no such program exists. It was revealed that Frost had taken several classes at Evergreen, but none since 2010.

“I can no longer stand on the sidelines, watching how some have been quick to paint Ms. Frost as an untruthful victim, while others have too casually dismissed what are serious allegations,” Chiang said in the press release.

“Both are a rush to judgement,” he continued. “As someone who has always favored evidence-based decision-making, I believe we must focus on a fact-finding mission that ascertains what information was initially submitted and where that information was unfortunately distorted.”

Frost has maintained she never misrepresented that she had anything beyond a high school education. CalPERS spokesman Wayne Davis has told CIO that the press release was written based on inaccurate information from executive recruiting firm Heidrick & Struggles.

Key CalPERS board members, including board President Priva Mathur, have backed Frost publicly, but one board member, Margaret Brown, voted against Frost’s compensation at Wednesday’s meeting.

Chiang also sits on the board, and through a representative, voted to approve the compensation package, despite issuing the press release calling for the investigation after the meeting.

Brown has also called for an investigation to sort out how the misrepresentations regarding Frost’s educational background came about.

It is not clear who exactly would conduct an investigation. CalPERS board members Wednesday said they planned to discuss hiring an inspector general for the pension system at a board governance committee meeting in December, although the $360 billion fund has no one who could conduct such a review currently.

The board could hire an external firm, but the next meeting in which it could take such action is in mid-November. The CalPERS board does not meet in October.

Chiang said Frost has performed well in her CEO role, yet failing to investigate would leave unresolved questions. “Integrity and transparency matter,” he said.  “Ms. Frost’s, as well as the pension system’s, long-term success depend on vigilantly maintaining the public’s trust. “

CalPERS is a major activist investor that engages corporations it holds stock in over their board governance, employee policies, and sustainability. Several officials connected to CalPERS, who asked not to be identified, said they don’t see how the pension plan can remain credible to challenge companies without addressing the issue of its own CEO and whether she misrepresented her credentials.

Chiang said CalPERS needs to keep its credibility.

“An organization with the strong reputation of CalPERS needs to have a leader with unimpeachable integrity,” Chiang said in his statement.

“If we do nothing, we will be perpetuating a double standard,” he went on. “Worse yet, a cloud of controversy will continue to hang over the head of the nation’s largest public pension fund. Until that cloud is removed, pundits will continue to question the decisions made by its leadership.”

The issues over Frost’s background make it the second time in the last few months the pension fund has been forced to address the qualifications of a key official.

In May, CalPERS quietly let go Charles Asubonten, its chief financial officer of only eight months, after an internal review determined he had exaggerated his resume including stating that he worked as a managing director at a private equity firm.

Frost had initially defended questions about Asubonten’s resume and was quoted in an October 2017 press release at the time of his hiring  praising his strong qualifications for the job.

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