Guiding hands for CalPERS, CalSTRS set to retire

One taught middle school math and science. The other tried cases for the state Department of Transportation.

In their other "careers," though, the pair played instrumental roles in laying the foundation for California's two public pension funds over the past decades, building billions in equity for retired government workers as well as influencing the behavior of corporate America.

At the end of this month, the two longtime trustees will retire from their pension fund boards, taking collectively nearly 60 years of experience and institutional knowledge.

Robert Carlson, the former Caltrans legal chief, is stepping down after nearly 37 years on the board of the $250 billion California Public Employees' Retirement System, the nation's No. 1 public fund.

Across town, Gary Lynes, a longtime Hillsborough public school teacher who retired this summer, is leaving the California State Teachers' Retirement System, the No. 2 fund, after more than 22 years on the board.

Both have been the deans of their respective boards for years, albeit with different styles. Lynes' low-key approach seemed well-suited for the teachers' fund while Carlson's outspokenness and global travels reflected CalPERS' international reputation as a Wall Street crusader.

Yet, colleagues say the two shared the same passion as custodians of billions in pension dollars earmarked for retirement benefits for more than 2.3 million retired and active public school teachers, state workers and local government employees.

They have battled governors and lawmakers who tried to raid the pension funds to help erase giant state budget deficits. They have backed efforts to sue scandal-plagued companies and lobbied regulators to beef up safeguards for shareholders. Both saw the birth of corporate governance activism led by the late state Treasurer Jesse Unruh, one of California's most powerful political leaders and a member of both boards.

CalPERS emerged as a pioneer for institutional investors, wielding its financial muscle to promote better business practices and open up the corporate boardroom to major shareholders.

"They have been very much responsible for the shift in power from the CEOs to the corporate boards," said James McRitchie, a retired state ethics officer and editor of CorpGov.net. "When Bob joined (CalPERS) the CEOs basically appointed all the members of the boards."

"PERS is losing a lot of institutional memory. That is going to be a real loss," longtime labor leader J.J. Jelincic said of Carlson, who once served as president of the California State Employees' Association.

Lynes' departure evoked much the same lament from CalSTRS trustee Carolyn Widener: "Gary was extraordinary. He was the historical memory of both our investment history and our benefit history. We will certainly miss that."

Lynes, 65, a local teachers union leader and negotiator, joined the CalSTRS board in April 1984 after his school district superintendent recommended his appointment to then-Gov. George Deukmejian.

"I said, 'Why me? I don't know a thing about retirement,' " Lynes said. "It was learn by fire."

Indeed, Lynes stepped into a political firestorm his first year. The legislative analyst had recommended lawmakers abolish the fund because of huge unfunded retirement obligations.

CalSTRS was still reeling over a scandal involving a former trustee accused of receiving kickbacks. And that fall, the board fired its chief executive after three months on the job because of questions over expense accounts and a probe into his conduct by his previous employer.

"That tarnished our reputation," Lynes said. "There was a lot of turnover."

At the same time, CalSTRS became responsible for its own investments, he said, pointing out that CalPERS had been managing the teachers' pension money in the past.

"We developed policies and procedures. We put the structure in place," Lynes said. That included the hiring of the first permanent chief investment officer.

During his tenure, CalSTRS' investment portfolio grew to about $174 billion today from $12.4 billion in assets in 1984. Its membership has increased to 813,000 from 254,000.

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