By William K. Black
January 26, 2017 Bloomington, MN
CalPERS was once the crown jewel of institutional investors, known for combining competence, integrity, and care. It invests funds and pays the pensions of California State workers. Over a decade ago, however, CalPERS’ senior managers and board became a cesspool that stood for the opposite. CalPERS’ corrupt culture is deeply rooted. Various California’s Treasurers have tried to clean up the mess, but the reforms have failed because few senior officers and board members have been willing to take on the rot with the forcefulness required.
I worked closely with board members in my role as the general counsel of Federal Home Loan Bank of San Francisco. It takes enormous courage to confront senior corporate officers or fellow-directors when they are maintaining a solid front. We had a good board, officers, and institution. In an institution with a deeply rooted, sick culture like CalPERS, everything works against forceful directors trying to cure the rot. They have to confront a phalanx of directors and officers who are genuinely horrified that someone would disturb the highly prized decorum of the boardroom. The officials maintaining that the sick culture is not sick become enraged at anyone that blows the whistle on their unwillingness to act aggressively to cure the sick culture.