.jpg)
The California Public Employees' Retirement System (CalPERS) Board of Administration today adopted a revised version of their Global Governance Principles (PDF) (Principles), including a new provision that cautions that corporate board directors who serve more than 12 years on the same company board are at risk of compromising their independence.
In the event a director reaches 12 years of service on a board, CalPERS' revised Principles call for a company to carry out rigorous evaluations to either classify the director as non-independent or provide a detailed explanation as to why the director continues to be independent.
"The Global Governance Principles are the underlying force behind all of our governance work," said Henry Jones, CalPERS Investment Committee Chair. "Adding clear parameters regarding our position on director tenure makes the Principles stronger, will help to ensure that independent directors remain truly independent, and will help ensure that corporate boards have a fresh perspective and are more diverse."
The Principles serve as the framework by which CalPERS executes its shareowner proxy voting responsibilities; engages public companies to achieve long-term, sustainable risk-adjusted returns; and works with internal and external investment managers to ensure their practices align with CalPERS' Investment Beliefs (PDF).
Additional revisions to the Principles adopted today include:
- Streamlined organization, from numerous capital market issues to five core subjects areas:
- Investor rights
- Board quality and diversity
- Corporate reporting
- Compensation
- Regulatory effectiveness
- Changes to Introduction and Purpose sections, including new references to the regulatory environment; financial markets; and environmental, social and governance issues.
- Inclusion of new principle concepts, such as regulatory effectiveness, which requires regulators to be properly funded.
The Principles were adopted as a Total Fund Investment Policy (PDF) in March 2015. In April 2015, the CalPERS Investment Committee agreed to form an Ad Hoc Global Governance Subcommittee (Subcommittee) to oversee review of the Principles. The Subcommittee met four times from September through December of 2015, culminating with the adoption of the revised principles and request that the Principles be considered by the Investment Committee for adoption.
The Subcommittee was comprised of Investment Committee Chair, Henry Jones, and members JJ Jelincic, Ron Lind, Bill Slaton, and State Controller Betty Yee. During the Subcommittee's review, the Principles were reduced from more than 100 pages to 39 pages, while maintaining essential content throughout the document. The revisions bring clarity and simplicity to the format of the Principles, and reduce duplicative and unneeded material.
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for nearly 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $284 billion. For more information, visit www.calpers.ca.gov.
CalPERS has a long-standing commitment to transparency. In celebration of Sunshine Week, take our daily quiz from March 13-19 and learn more about our efforts.
