CalPERS board sends draft code of conduct back for overhaul

California Public Employees Retirement System’s Board of Administration chose to keep revising a draft of a controversial code of conduct for board members at its meeting this month after push-back from certain members.

The code was first introduced at CalPERS’s offsite meeting in July, drafted by board members Jason Perez and Rob Feckner. That meeting ended up consumed by controversy over a passage requiring board members to support all board decisions once they are made.

The controversial passage read, “When action is taken by a committee or the full board, all board members will support the action regardless of their individual vote on the policy.”

The line was struck from a later draft of the code of conduct.

But on Tuesday some board members took issue with clauses in the new draft, titled “CalPERS Board Code of Ethics,” when it was taken up by the governance committee.

Section 9, titled “Accountability,” included a line that quoted Roberts Rules of Order, a manual of parliamentary procedure first published in 1876.

It read: “CalPERS considers a breach of this code to be conduct which is ‘tending to injure the good name of the organization, disturb its well-being, or hamper it in its work.’”

Board member Margaret Brown, who is not on the governance committee but sat in on the meeting, told Buyouts she suspected the line was a way to bring back the controversial “gag order” from the previous draft. “[I]f you are critical of a board decision, they could say you are injuring CalPERS and therefore you are subject to censure,” she said. “I think it’s a way of getting the ‘go along, get along,’ requirement back in there but using unclear language to get it back in.”

Another section, titled “Affirmation,” required board members to “certify under penalty of perjury that they understand the Code and that they are in compliance.” Several board members called for that to be changed or eliminated altogether.

Ashley Dunning, a partner at Nossaman LLP who is CalPERS’s fiduciary counsel, listened to the meeting by phone and commented at the end. She said she was “not familiar” with pension boards subjecting themselves to penalty of perjury and agreed that section should be changed.

Many members found the code overall to be redundant with an already-existing governance code, and called for it to be significantly shortened.

The committee decided to send the code back to staff and Dunning, Perez and Feckner for more work and to have it be presented to the governance committee again at next month’s meeting. “The document is very poorly written, it doesn’t make sense, it overlaps with the governance policy we already have, and I’m not really sure what they intended to use [the perjury clause] for other than to drum up charges and get a board member convicted of a felony,” Brown told Buyouts.

Buyouts reached out to every member of the governance committee for comment but received no responses. A CalPERS spokesman told Buyouts he did not know if the two controversial clauses would be in the next draft of the code.

The code of conduct debate comes just as the board is considering a massive overhaul of the fund’s private equity program that has apparently been hamstrung by press leaks and does not have the support of the full board. Perez and Brown have both voiced opposition to the current plan, which involves creating two funds which would be run independently by investment professionals.

Board president Henry Jones has told Buyouts there is a “total disconnect” between the private equity program and the introduction of the code of conduct, highlighting that the code is part of a wider board self-evaluation initiative.

CalPERS chief investment officer Yu “Ben” Meng is scheduled to give an update on the private equity program overhaul at next month’s meeting on Sept. 16-18.

Action item: read the latest proposed draft of the CalPERS code of conduct here.