CalPERS

Definition

CalPERS, or the California Public Employees' Retirement System, is one of the largest public pension funds in the United States, serving over 1.9 million members. It plays a crucial role in corporate governance by actively engaging with companies in which it invests to promote responsible management practices and shareholder rights. CalPERS aims to ensure that the interests of its members are protected while promoting sustainable business practices through its investments.

5 Must Know Facts For Your Next Test

1. CalPERS was established in 1932 and has grown to manage over $400 billion in assets, making it a significant player in the investment community.
2. The fund invests in a diverse range of asset classes, including public equity, fixed income, real estate, and private equity, influencing many corporations across various industries.
3. CalPERS is known for its strong stance on corporate governance issues, advocating for board diversity and better transparency in corporate practices.
4. Through its Corporate Governance Program, CalPERS engages with companies to improve their governance structures and promote long-term value creation.
5. The fund utilizes its shareholder voting rights to support initiatives that align with its values, such as environmental sustainability and ethical business practices.

Review Questions

• How does CalPERS influence corporate governance practices among the companies it invests in?
  • CalPERS influences corporate governance by actively engaging with companies to advocate for responsible management and transparency. This includes pushing for board diversity, better accountability measures, and sustainable business practices. By leveraging its substantial voting power, CalPERS encourages companies to align their operations with long-term shareholder interests, ultimately aiming to protect its members' investments.
• What role does shareholder activism play in CalPERS' investment strategy, and how does it benefit the pension fund's members?
  • Shareholder activism is integral to CalPERS' investment strategy as it allows the fund to advocate for changes that enhance corporate governance and drive long-term value. By being an active participant in the companies they invest in, CalPERS helps ensure that management decisions consider the interests of all stakeholders. This proactive approach not only seeks to improve financial returns for members but also promotes responsible corporate behavior that aligns with societal values.
• Evaluate the impact of CalPERS’ Corporate Governance Program on the broader landscape of public pension funds and corporate governance reform.
  • CalPERS' Corporate Governance Program has set a precedent for other public pension funds by demonstrating the effectiveness of shareholder engagement in driving corporate governance reform. Its commitment to advocating for transparency, accountability, and sustainability influences not only its portfolio companies but also shapes industry standards across the investment landscape. As more pension funds adopt similar strategies, it fosters a culture of increased responsibility among corporations, ultimately leading to enhanced protections for investors and improved societal outcomes.

Related terms

Corporate Social Responsibility (CSR):

A business model that helps a company be socially accountable to itself, its stakeholders, and the public, focusing on ethical behavior and sustainable practices.

Shareholder Activism: The efforts of shareholders to influence a corporation's behavior by exercising their rights as owners, often through proposals or direct engagement with management.

Proxy Voting: The process by which shareholders delegate their voting power to another party, often used to vote on corporate governance matters during annual meetings.