The California Public Employees’ Retirement System (CalPERS) , – which has worked for years to achieve significant corporate governance and financial regulatory reform – today praised the new federal financial reform law as an historic step toward protecting markets and advancing shareowner democracy.
“At long last shareowners have achieved the kind of protections critical for restoring confidence,” said Rob Feckner, CalPERS Board President. “We applaud President Obama and Congress for achieving this comprehensive overhaul that protects the pension assets of our 1.6 million members and all shareowners.”
“We have worked for many of these protections for upwards of a decade, especially for independent boards, access to the proxy, and better executive compensation policies, “ he said. “This reform goes a long way to plug the gaps that contributed to the recent financial crisis. It’s good for shareowners, good for business and for taxpayers.”
The law is comprehensive in design. It holds credit rating agencies accountable for their products and services. It imposes tough reporting requirements on financial derivatives, hedge funds and private equity funds; sets up a bureau to protect consumers in the financial marketplace; and establishes a council to identify and monitor systemic risk that might threaten the nation’s economy.
“This reform is a response to a near major meltdown of our financial system,” said George Diehr, Chair of the CalPERS Investment Committee. “While our markets are more stable today with prospects of continued recovery, these reforms significantly address underlying weaknesses in our regulatory system that could have resulted in yet another financial crisis.
“We’re grateful to Senator Chris Dodd, Chairman of the Senate Banking Committee, and Congressman Barney Frank, Chairman of the House Financial Services Committee. The passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act is a testament to their leadership and commitment to the restoration of trust and confidence in our financial system.”
The financial reform law affirms the authority of the U.S. Securities and Exchange Commission (SEC) to issue rules that would enable shareowners to place the names of candidates on companies’ board election ballots.
“This critical provision would not have been possible but for the determination of Senator Chuck Schumer and Congresswoman Maxine Waters, who worked tirelessly throughout the legislative process to protect the interests of shareowners,” said CalPERS Chief Investment Officer Joe Dear.
The rules and regulations proposed by the SEC will strengthen corporate boards’ accountability to company owners and restrain some of the risky practices that contributed to the financial crisis.
“We’re pleased that the financial reform law gives the SEC added enforcement powers and authority to collect and retain fees to finance its programs” said Dear.
The law also gives shareowners the ability to cast advisory votes on executive pay packages. It requires compensation committees to have only independent directors, mandates procedures for companies to take back compensation awarded on the basis of inaccurate financial statements, directs the SEC to clarify compensation-related disclosures and requires federal regulators to issue compensation rules for the firms they regulate.
CalPERS, with approximately $205 billion in assets, is the nation’s largest public pension fund and administers retirement benefits for more than 1.6 million active and retired State, public school, and local public agency employees and their families. For information about CalPERS, visit www.calpers.ca.gov. For CalPERS corporate governance information, visit www.calpers-governance.org.
