CalPERS announced two significant reforms designed to restore confidence in CalPERS and ethical conduct – the establishment of a Senior Level Enterprise Risk Management Office and the launch of a new Ethics Helpline to identify fraud and waste.
The CalPERS Board of Administration approved the new Office of Enterprise Risk Management to identify risks in the pension industry. The Helpline will enable the pension fund to receive tips, concerns, and information regarding possible instances of wrongdoing – including possible allegations of fraud, waste, abuse, conflicts of interests, safety violations, harassment, or other misdeeds. According to Board member George Diehr:
Recent events on Wall Street, pension fraud in this state, and even allegations of wrongdoing at CalPERS have taught us that managing risk and ensuring accountability across the enterprise are critical to our effectiveness today and tomorrow. It’s a new day at CalPERS, and these additional tools for managing CalPERS are being added to a very important list of efforts we have undertaken in the last 12 months to restore confidence, integrity, and accountability to all that we do.
Other improvements include:
- Co-sponsorship of legislation (AB 1743) that will require placement agents to be subject to strict gift limits, campaign contribution prohibitions, and be prohibited from receiving compensation contingent upon any CalPERS investment decision;
- Tough rules for communication between Board Members and staff about investment proposals;
- Authority to discipline Board Members who violate policy;
- The pursuit of information and a special review to ensure CalPERS has not been victimized by placements agents; and
- A ban on gifts to employees from business partners and potential business partners
The Ethics Helpline is designed to open the doors widely to those who might have information about possible instances of wrongdoing. It will operate 24 hours a day, online and on the phone. It will be operated by Ethics Point, a specialized company with a strong track record for managing similar hotlines. It has more than 2,300 clients in 300 industries and its specially trained staff handles reports from 120 countries in more than 150 languages. The Helpline number is toll-free (866) 513-4216 or TTY (866) 294-9572. Service is also available on the Web at http://calpers.ethicspoint.com.
Clearly steps in the right direction so that CalPERS can better practice the good corporate governance it preaches.