CalPERS gets tough on manager conflict of interest
US- Following the decision last week by a group of large US pension funds to clamp down on companies not abiding by good company practice, the California Public Employees’ Retirement System has announced that investment banks and money managers wishing to do business with it will now be required to adopt stringent conflict of interest principles.
Yesterday the Board of Administration at the US’s largest public pension fund voted to adopt the set of investor protection principles aimed at cleaning up corporate abuses and ensuring greater transparency of money management firms.
Dr William Crist, president of the board, said: “weak corporate governance and fraudulent financial reporting practices have caused investors around the globe to lose confidence in the market. Everyone must do their part to help restore integrity in our markets and help protect our pensioners.”
The new requirements state that, with immediate effect, investment managers should consider the integrity and quality of a company’s accounting before investing CalPERS assets. For existing and new money managers CalPERS insists that, where relevant, compensation for portfolio managers and research analysts be disclosed.
Michael Flaherman, chair of CalPERS investment committee insists these are what he calls “simple steps.”
Californian treasurer and CalPERS board member Phil Angelides has been spearheading the proposals following the corporate scandals of Tyco, Enron and WorldCom. Angelides is also pushing for the divestment from companies operating through offshore tax havens.
CalSTRS, sister fund to CalPERS and one of the core pension funds at last week’s meeting in New York, agreed that it would also be taking action, but plans would not be discussed until October.
The funds have yet to sell any holdings, but up to 22 companies are under threat of seeing their stock sold.