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Reforming Public Pensions

To increase transparency and accountability of placement agents who influence public fund investments, Controller Chiang successfully sponsored legislation that requires placement agents to abide by the same regulations and reporting requirements that govern lobbyists, including requiring them to register and report all compensation, and prohibiting them from being paid contingency fees and giving campaign contributions to board members.

In addition, Controller Chiang successfully sponsored legislation which addresses the "revolving door" problem evident in recent CalPERS-related scandals. The law now prohibits CalPERS and CalSTRS board members and senior officials from leaving CalPERS and CalSTRS and immediately going to work for companies or investors that did business with the pension plans. It also prevents employees and board members from working for placement agents for 10 years after they leave CalPERS or CalSTRS.

He also sponsored legislation to require state pension fund candidates and board members to follow the same campaign reporting requirements as other elected officials, and sponsored legislation to reduce the amount of allowable gifts staff and board members of CalPERS and CalSTRS can accept. The bill would lower the amount from the $420 a year allowed by the Fair Political Practices Commission, to $50 a year.

Other actions the Controller has taken include:

• Recommending that CalPERS and CalSTRS adopt policies that he implemented at his office to require board members and staff to post their Statements of Economic Interest, as well as their reimbursed travel claims, on the website so the public has each access to that information;
• Supporting CalPERS' and CalSTRS' efforts in financial regulatory reform to achieve better proxy access for shareholders;
• Despite some opposition, disclosing the actuarial liability of the State's commitment to fund the health, dental and vision benefits of current and future state retirees. He also continues urging the Legislature to begin setting aside additional payments that can be invested in order to grow the fund and cut future costs to the State's General Fund;
• In response to the City of Bell scandal, proposing a policy that requires cities and counties belonging to CalPERS to immediately notify the pension fund if they seek to significantly increase compensation for an elected official or public employee;
• Receiving, at his request, support from CalPERS and CalSTRS to promote diversity on corporate boards to ensure board members are both competent and responsive to the demands of the U.S. and global economies. This effort has gained national support through efforts of the Council of Institutional Investors and guidelines for disclosure adopted by the Securities and Exchange Commission;
• Identifying weaknesses in investment office policies related to delegation of authority, use of leverage and compliance, and supporting a major review of all investment policies and practices related to risk;
• Gaining support for adopting resolutions that provide more discretion to the pension boards regarding the payment of incentive bonuses to executive and investment officers. For example, the Controller led the effort to ensure that the CalPERS and CalSTRS boards would have the authority to eliminate incentive awards in any year when the investment return of the pension fund is negative.