EASTSIDER-There are really only two types of public sector Boards.
The normal ones, where the Board oversees the bureaucracy, sets policy, asks questions, and runs the agency, and the weak Boards, where they are there for the money, the power, because they were told to do it, or to fatten their resumes. The weak Boards are fat targets for mischief.
Speaking as a recovering bureaucrat, there are a couple of sure fire ways that a savvy staff can functionally coopt the running of a weak Board. The bullet proof way requires knowledgeable tenured staff. They simply produce thousands of pages of documents with dense technical language, footnotes, and lots of references to feed to the Board. In short, it’s the “bury them in bullshit until they cry uncle” approach.
Of course, if you don’t have the skill set to do the A Plan, as seems the case with CalPERS senior management, you go to Plan B and become their best buddy, alleviating their need to read all those pesky documents that come their way. This is called the “Yes sir, we’re here to help you!” approach. Doesn’t require too much mental exercise or reading any fine print by the Board. Actually, it’s not necessary to read the print at all, because all the Board has to do is vote for the staff recommendations.
What helps give the B Plan credence is that the staff can hire a bunch of independent contractors to deliver the party line during posh retreats, glossing over any “con” arguments. After all, those consultants wouldn’t lie, would they? Of course not.
You can probably guess the CalPERS Board went for Plan B.
First a big thank you to the NakedCapitalismblog. They have been doing a splendid job of covering the May Board meeting (and peripheral events) in a way that I have never seen before, and I’ve been playing with CalPERS since 2014.
So, let’s see some issues and outcomes since my last post.
1) The issue of the President usurping an elected Board member’s right to see all email and documents is only kinda sorta resolved. At their meeting, most of the Board -- except Margaret Brown and John Chiang -- didn’t seem to care that the Board President does whatever she wants, and they can’t be bothered to read mail anyhow.
In discussing the matter, there were a couple of handouts that look like Rube Goldberg schematics, and ultimately the Board is mostly OK with the Policy. Of course, the policy is illegal, but we will see how stupid President Mathur wants to get. For now, I assume the secret reprimand will go away and at least two Board members will get their mail. Especially since outsiders are watching.
2) Equally disturbing was Obergrupenfuhrer Priya Mathur’s locking Brown out of the office and refusing to provide transcripts of prior meetings. Is CalPERS becoming a banana republic? Anyhow, directly faced with the issue, even this Board couldn’t take the heat, and voted to keep the practice of making transcripts of Board meetings. Overruling the staff recommendation, by the way. Personally, I wonder if Priya Mathur has the cognitive skills to read the documents in question, much less comprehend them.
3) Next, we discover that staff, out to “help” the Board members, has them sign blank and undated expense forms! Even I was agog with this one, but you can read the article Criminality CalPERS Style here, proving it’s true beyond a doubt.
4) In light of all the absolutely egregious and probably illegal actions taken directly and indirectly by her very own self, CEO Marcie Frost had the brass to use another bought and paid for consultant to miraculously recommend a big-time compensation increase. Yup, this in addition to the fact that she’d been using the Ted Eliopoulos gimmick of getting huge bonuses (18% last year).
The fact that she got the job at all was a gift (of public funds), and her performance to date has been more as a front for General Counsel Matthew Jacobs than indicating that she has actually done anything positive to justify her existence.
I could go on, but it gets depressing. And this was all within the last few weeks!
How Did Staff Anesthetize and Bamboozle the Board?
With decades of experience working with, for, and against Boards, let me share a couple of specific ways this could happen.
There is a 26-page document buried in the thousands of pages of governance information about CalPERS called simply Governance Policy. Check out the link, because if you try to find this turkey without help, good luck.
Anyhow, lets key in on one of my favorite sections called “Open and Accountable to Stakeholders.” Here’s the actual text:
“The Board and executives are appropriately open in the way key decisions are made and public ally disclosed. Governance rules are clear and disclosed. The Board has access to appropriate expertise and data free from undue influence. The Board and executives are both accountable to stakeholders for their performance.”
Sounds innocuous, doesn’t it? Sort of like meaningless pablum. Wrong! First of all, the Board is the employer, not the staff. They are not “both” accountable. Also, the implication of the section is that not only are the key executives at the same level as the Elected Board, they will be the practical deciders as to “appropriate expertise and data free from undue influence.” And I bet the Board never even felt the knife as they voted for the 26-page document without ever reading it.
In another section, the Board agrees to “refrain from communications with staff” outside of a Board or Committee meeting but says nothing about the staff contacting Board members.
Finally, there’s another section where the Board gives it all away. The title is “Delegations to Executives and Board Reporting Relationships,” which sounds innocuous. Until you read Section A:
“The Board will have one direct report: the Chief Executive Officer. The Chief Executive Officer is responsible for the overall administration of all units, departments and functions within CalPERS. The Board and the Chief Executive Officer share responsibility for hiring, evaluating, and if necessary, terminating the Chief Investment Officer.”
This is the section that made it easy to take over the Board. All General Counsel Jacobs had to do is to coopt the clueless CEO Marcie Frost, and he gets to run the Board with her as his puppet. Further, by implication all staff except for the CIO can be controlled by the CEO without the Board having a clue.
I could go on, but this post is already getting a bit long. More for a later time.
The Sacramento Bee’s Role
Of course, it helps to have the Sacramento Bee’s Adam Ashton (The State Worker section), working hand in glove with the CalPERS staff. He might as well be getting a paycheck directly from the CalPERS Public Information folks. Too bad, ‘cause I love the Beeand I am a subscriber.
To show point/counterpoint, compare two recent articles: one by the venerable LA Timesreporter Michael Hiltzik putting the nail in CIO Asubonten’s coffin, with questions about new CalPERS CFO’s background and experience that should be taken seriously by the pension fund; compare Hiltzik to the fake “neutrality” of Adam Ashton’s article writing that, “seemingly dysfunctional CalPERS leaders spar over documents, access.”This was more a hit piece against Brown than actual reporting.
So, it turns out that one day CalPERS goes ahead and hires the unqualified Mr. Asubonten, having proudly sent out a Press Release last September naming him as CFO of CalPERS, and then after the you know what hit the fan, stating he “no longer works” for CalPERS.
In a moment of irony, the bye bye for Asubonten was announced on May 21, only a few days after CalPERS gleefully announced that Marcy Frost was given sole CIO hiring, firing responsibility.
Shame on the CalPERS Board. This is dereliction of duty, pure and simple. And what do you think the odds are that they will start performing their fiduciary duty and begin to run the place like a real Board? Their actions (and inactions) are matters that could – and should -- result in prosecution.
In future posts, we’ll take a look at how staff are leading the Board into really, really bad Private Equity Schemes. Rock on, Margaret Brown. And keep on a comin’, NakedCapitalism.
(Tony Butka is an Eastside community activist, who has served on a neighborhood council, has a background in government and is a contributor to CityWatch.) Edited for CityWatch by Linda Abrams.