A few weeks ago, CalPERS’ Director of Corporate Governance, Anne Simpson, sent a letter to the Securities and Exchange Commission in support of the SEC’s proposed pay for performance disclosure rule. Her letter notes CalPERS’ belief that “Compensation of executives in publicly listed companies should be driven predominantly by performance.” CalPERS Global Governance Principles, California Public Employees’ Retirement System, Updated March 16,2015, Role of Compensation Committee, Section 5.5 d. Pay for Performance.
As noted last week, CalPERS’ Chief Investment Officer is California’s highest paid civil servant (excluding the UC system). According to the Sacramento Bee’s state worker salary database, the CIO’s total pay for 2014 was $745,000, up over 36% from $547,000 for the year before. According to Pensions & Investments, CalPERS is reporting preliminary and very anemic investment returns of 2.4% for its fiscal year ended June 30. According to the same article, this is 5.1% below CalPERS’ assumed return.
The stark discrepancy between the increase in the CIO’s pay and CalPERS’ poor financial returns is striking. However, it should be noted that the incumbent CIO was only appointed last September. He had served as acting CIO for the previous seven months. I’m sure that some will therefore argue that it is unfair or misleading to compare CalPERS’ recent disappointing performance with the CIO’s wage history, but that would be my point.