Yves here. Readers of our CalPERS posts know that we regularly ask you to send letters to state officials and that has actually proven to be effective. Treasurer John Chiang, who sits on the CalPERS board, sponsored private equity transparency legislation, and insiders tell us that your letters and e-mails were a big reason why.
An even bigger way to help change the system is by running for office. Margaret Brown explains how Naked Capitalism led her to decide to run for the CalPERS board, a public office, and has helped make her a better candidate.
So I hope her story will not only lead you to donate to our fundraiser (the Tip Jar is over there), but if you are in California, to tell friends and family members who are eligible to vote for Brown in the runoff in November to cast a vote for her and promote her candidacy.
By Margaret Brown, a candidate for the CalPERS board
Naked Capitalism has meant a lot to me. If it is even remotely as important to you as it has been to me, please give now and give often.
I know firsthand the financial and emotional devastation that comes from losing your income and healthcare. For me, the diagnosis of a life-threatening illness came without warning. The treatment was expensive and had serious side effects, but the prognosis for survival (measured at 5 years) was good.
The treatment worked but unfortunately the side effects took their toll and left me unable to work. When my sick days were exhausted, I turned to CalPERS for my retirement options.
Instead of help, I received form letters from CalPERS stating that my final compensation could not be calculated. Instead, there needed to be an audit to determine my final compensation with no estimate of time from CalPERS. I was told to wait.
I could not work full time. The medical bills piled up. My disease went into remission and I have my family to thank for a place to live, to rest, and regain my health.
But I lost everything else. I used the courts for protection from creditors until I could find my financial footing. I paid my taxes and student loans, but I lost our family home.
I promised myself that if I survived, I would do everything in my power to help others who struggled with the CalPERS bureaucracy; to help those who were told to wait for their pension or healthcare issues to be resolved.
Naked Capitalism is the driver that has allowed me to keep the promise I quietly made to myself more than five years ago. I found Naked Capitalism by accident in 2016, when I was reading the OC Register and saw a story about the atrocious returns for CalPERS. I searched on the phrase CalPERS Losses Millions and up popped Naked Capitalism. I started reading and could not believe the commentary and depth of information contained in Yves’ blog.
The critiques were detailed and devastating, and most importantly accurate. There was so much more information than I had ever seen. I actually looked forward to the next story and the next, detailing all that was wrong at CalPERS.
More importantly, as a long-lost student of International Political Economy, NC was providing me crib notes for what was going on in the world. Yes it felt like cheating, but it is the best way to get detailed information on a range of issues.
In late January of this year, I read the post that CalPERS was trying to eliminate its most effective Board member, JJ Jelincic. I was outraged. How could legal counsel allow this to occur? And how could other Board members allow this to occur? Why wasn’t someone shutting this down? Why wasn’t someone helping JJ Jelincic? And that’s when it hit me. I could help him. I could run for the Board and help him. I could run for the Board and help others.
Once I committed to running, I knew I had to find a way to meet and talk to Yves Smith. Another frequent CalPERS critic provided the introduction. I quickly learned something that Naked Capitalism readers won’t be surprised to hear: Yves doesn’t suffer fools. She wanted to know my plan to win, and she wanted to make sure I had thought out what I was trying to do. She was tough, critical, and so very helpful. The woman has boundless energy and never sleeps.
This brings me to my final point, which is that Naked Capitalism isn’t just trying to chronicle things that are broken in our society. Rather, I have experienced firsthand that Yves and her colleagues are trying to fix them.
The blog and I share the same goal, which is to build up and strengthen CalPERS. We also share the same belief that this goal can only be achieved if CalPERS does a much better job of executing its fiduciary duties. The first step is for CalPERS to acknowledge that the status quo, which Naked Capitalism has painstakingly chronicled, is not acceptable.
I am proud to support Naked Capitalism, and I hope you will too. Go now, to the Tip Jar! And give like you mean it!
10 comments
Comments are closed.
This is a touching and inspiring narrative.
Somehow our institutions have lost the notions of service, duty, and honor that had inspired the Greatest Generation and have replaced them with greed and naked self-interest. They first placed the interests of their institutions above the interests of the members and beneficiaries, but then they decided that their personal interests should also come first, starting with pride that rotted into hubris followed by avarice and the shameless desire for personal financial gain.
Thanks for this post.
” I received form letters from CalPERS stating that my final compensation could not be calculated. Instead, there needed to be an audit to determine my final compensation with no estimate of time from CalPERS. I was told to wait.” (my emphasis)
A state DB pension system that can’t provide accurate final compensation within a pre-specified time frame – usually 2 months minimum and 3 months maximum – of request? There is something very wrong at CalPERS if this is the case.
I much hope you win a CalPERS board seat.
Aw, I was getting psyched to vote for Yves Smith for whatever office. Oh well, maybe next time.
I am equally concerned with the CALPERS board ensuring the long term survival of the fund and with ensuring the money from the fund is used responsibly, especially the private markets money. CALPERS is known as a leader in these issues, and I actually commend them on both their management of funds, and of labor disputes, but there needs to be more done. There needs to be consequences for managers or companies that run anti-union or anti-worker campaigns. There needs to be a policy that covers private market managers, too.
Calling JJ effective may by hyperbole, perhaps his passions led him to be more polarizing than helpful at time. He was always a strong advocate for responsible and sustainable investing. But he also never really noted, as NEEDS to happen, that labor risks need to be mitigated as part of fiduciary, not moral duty. By always associating labor-risks as moral issues, JJ and other board members only move staff and the board more toward seeing those issues as not integral to ensuring good returns.
Retirees and members need another strong voice to stand up to PE fees and bad behavior, to stand for transparency, to ensure workers are not abused. I hope that we get more trustees to that effect and i wish them all good luck in their running.
That was the judgment of law professor Bill Black, who wrote a post he titled: CalPERS Seeks to Destroy Its Most Effective Director. Despite all the opposition to him, JJ ask questions that showed CalPERS didn’t know what it was doing or was lying, which forced major changes, such as them disclosing carry fees.
As for labor rights, JJ isn’t the only board member who is a union member. So is Mike Bilbrey, Rob Feckner Ron Lind, Theresa Taylor, and Priya Mathur. Yet Mathur has staked out the social responsibility beat and made enough noise about that that appears to be all CalPERS is willing to do to deviate from investing norms.
Perhaps more important, the unions themselves don’t support the point of view you advocate. They are all closely aligned with staff. Staff, as we have seen, is captured by private equity. And staff’s point of view is not just “We have to be in private equity and we’re passive investors so we can’t do much to influence what they do” but “Private equity can keep us from investing in their funds, so we must be super nice to them and not make their lives difficult”. As Andrew Silton has said, that position is ridiculous. CalPERS is such a large play that it will still be solicited.
So the real issue is that unions don’t support the position you advocate and union support is critical to getting elected. Mike Flaherman, who was a pro-reform candidate, did very poorly for the other seat in part because all the unions endorsed his opponent, and staff and the unions even got the Treasurer and Controller to endorse his opponent, when there is no question Flaherman would have been a board member (Flaherman was not just a former CalPERS board member, he’d also been head of its Investment Committee). But Flaherman was also a critic of CalPERS staff, and in particular how it was managing private equity, and that had to be stopped.
As for taking a more pro-labor position in private equity, the only way that will happen is if CalPERS brought private equity in house. Instead, it’s going in the other direction and trying to introduce another middleman to reduce transparency, which will also increase fees.
Are unions against Flaherman, or are union managers against him? Is it not like the difference in interests between professional corporate managers vs shareholders with shares diluted so that no block is easily formed?
The union leadership, CalPERS staff, and the board ex JJ Jelincic was against him.
The ballot statement is very important in the election. His opponent, Miller, had a very long list of endorsements. Flaherman had only two, the two retiree organizations, plus Jelincic. Even though the retiree organizations represent more votes than all the unions combined, the optics of such a long list worked against him.
In addition, with the benefit of hindsight, Flaherman’s messaging didn’t help. Even though he explained he’d been a reformer/whistleblower, which meant he’d burned his bridges with the finance industry, he didn’t make enough ritual “I am here to defend your pension” statements. He must have assumed that was obvious from his actions.
That meant he looked like a technocrat who was criticizing CalPERS. People like that are typically out to “reform” as in cut pensions, which is the opposite of his intent. And the unions played up that he was from Wall Street and said he couldn’t be trusted. “He’s not one of us.”
Finally, the lack of a secret ballot was a very effective vote suppression mechanism to support union-backed candidates. The voters would would be most worried would be union members who were thinking about voting against the union candidates, meaning for Flaherman and Brown. Voting was down about 20% from the last election for those seats, when it should have been up by virtue of one seat being open (as in having no incumbent). So it looks like the vote suppression worked.
” Even though he explained he’d been a reformer/whistleblower, which meant he’d burned his bridges with the finance industry, he didn’t make enough ritual “I am here to defend your pension” statements. He must have assumed that was obvious from his actions. ” (my emphasis)
Voters in the US, by and large, do not remember history, even recent history that affects them personally, but must be reminded. That’s one reason Obama’s cynical “look forward, not backward” ploy worked. He knew, and most of our elected pols know US voters don’t remember or think what just happened is connected to the next election cycle. “Look forward, not backward “. I’m afraid voters must be reminded constantly of the state of play, reminded how to change things, lest the US voters’ traditional optimism about the future be their undoing by electing representatives who won’t represent most voters’ interest but instead represent only Wall St’s interest. Come the next election cycle voters will again be encouraged to forget the past, today is a new day, look forward not backward.
Thank you, Ms. Brown for sharing your story. I’m glad to hear you are in better health now.
I share your feelings about Yves and her work. Good luck in the run-off. I’m sure you’ll be an outstanding Board Member.
No matter how I read anything the long run conclusion is, ”
Sorry sucker, thanks for playing.’