For most of the last decade, the California Public Employees Retirement System was the world leader in financial morality, refusing to invest in countries where slave labor is the norm, where there is no freedom of speech or press, and where there are no free market policies.
China, for one.
As the largest pension fund in the world with more than $240 billion in assets and cash constantly flowing in for new investing, CalPERS has managed to influence the laws and societies of many countries. The Philippines are one example of a nation that adapted its labor laws to fit within CalPERS guidelines.
Under the guidance of former state Treasurer Phil Angelides, the defeated 2006 Democratic candidate for governor, the gigantic retirement fund consistently for most of the last decade placed morality over money – while still making plenty for its pensioners through steady investment policies.
Until this fall. With Angelides sitting on the sidelines, virtually anonymous bean-counting money managers have taken over at CalPERS. They pointed out that the fund has lost about $200 million in potential profits because it did not invest in Chinese businesses which saw large stock price runups.
Never mind that many of those companies pay their workers less than a dollar a day to make everything from baseball caps to coffee tables, sophisticated electronics, and toys that have been recalled because of lead in their paint.
Some even pay them nothing, using the labor of millions of convicted so-called criminals and political prisoners to make goods sold all over the world.
Making slightly lower profits by refusing to take advantage of this kind of slave and near-slave labor did not bother CalPERS while Angelides was its leading influence.
That’s changed. Under its newly adopted policy, CalPERS board members, many of whom are now appointees of Gov. Arnold Schwarzenegger, will let six outside money managers charged with investing funds earmarked for emerging markets evaluate companies and their home countries.
The only restriction on them will be that they have to justify their investments to the pension fund’s trustees.
That apparently won’t be hard to do. For by abandoning a policy that has induced positive change in several nations, the trustees are signaling that they’ve changed their priorities: Money now trumps morality.
Some trustees deny this, of course. “This shouldn’t be seen as a loosening of the policy,” said trustee George Diehr, elected to the board as a representative of state employees. “We’re not opening the floodgates.”
But they might as well be. For when a firm policy that has produced positive results is abandoned because of the potential loss of less than one percent of CalPERS funds, that sends a message, to wit: “This board no longer cares much what you do to your workers; we just want to make money.”
Observers in all philosophical wings of California politics were horrified by this move. “For a couple hundred million, they want to hire slaves?” observed Steve Frank, a former head of the far-right California Republican Assembly, on his weblog. “It is time to stop them, again. Honesty and morality must be part of our investment plans. What is controversial about not investing in slavery?”
Any policy that can make a dedicated conservative Republican like Frank long for a policy begun by liberal Phil Angelides must be worth keeping.
And state legislators are the only group with the power to second-guess the CalPERS board. Which means it’s high time to call pension fund board members before legislative committees and cross-examine them on their votes.
After all, turnabout is fair play. If the CalPERS board members can adopt a policy requiring their fund managers to explain their actions periodically, surely legislators should not hesitate in demanding that those board members also be called to task when they adopt a policy that just might encourage brutality, slavery, and other forms of unconscionable exploitation.
