While the nation's largest public pension fund took a break from its April board meeting, one of its newest members walked to her office and could not open her door because a digital lock did not recognize her badge.
CalPERS Board of Administration member Margaret Brown recorded herself failing to open the door, shared the video with a friendly financial blog and allowed it be posted to YouTube under a headline calling the incident an “illegal lockout.”
“I have a badge and I’m trying to get in my office, and, yeah, it doesn’t work. Very, very nice,” she says in the video.
Her assumption that she was being "locked out" and her decision to share the video on social media are signs of escalating tension on the board that handles $350 billion in assets for 1.9 million California public employees and retirees.
Brown, a Southern California school district administrator, hired an attorney to communicate with the board and canceled a meeting with new CalPERS board President Priya Mathur.
Mathur, in turn, has disciplined Brown for bringing a friend into a restricted area in the CalPERS headquarters and enacted policies that effectively limited Brown’s ability to read confidential information.
Their rift blew into the open at a public meeting where Brown asked whether she would be arrested for showing up at the job California public employees and retirees elected her to do.
The conflict is “extraordinary,” said Charles Elson, the director for the Center of Corporate Governance at the University of Delaware. “It’s unusual with a large pension fund where you have seemingly dysfunctional conflict. They’re going to have to resolve it. It’s not good for the fund.”
It’s also unfolding just as CalPERS heads into proxy season – the run of annual board meetings where the massive pension fund uses its clout to press companies for changes in the way they do business, from bringing more diversity to their boards of directors to disclosing their plans for coping with climate change.
In some ways, the drama at CalPERS is a hangover from last fall’s election. Brown as an underdog challenger unseated union-backed incumbent Michael Bilbrey.
Brown cast herself as a watchdog for retirees and Bilbrey as an uncritical board member; Bilbrey’s campaign drew attention to four settlements one of Brown’s previous employers paid to resolve workplace retaliation claims that initially named her.
Brown declined an interview request from The Sacramento Bee. She wrote in an email, “I was elected as an outsider and defeated an incumbent who had the endorsement of nearly every then-member of the board, including Priya Mathur. So it's not surprising, though disappointing, that some of the people who opposed my candidacy have continued to make me unwelcome, to the point of interfering with my rights and privileges as a board member.”
Mathur was elected to CalPERS in 2003 and won a close board vote of 7-6 to become the board president in January, succeeding 13-year CalPERS board President Rob Feckner. Feckner now is vice president.
As president, Mathur has influence over what information reaches board members, a role in setting agendas, power to discipline board members and authority to place board members on different committees.
She changed one CalPERS board policy in January that now is relevant to her conflicts with Brown. Mathur restricted access to confidential documents in such a way that members can only read the material at CalPERS headquarters.
Mathur said she was worried that confidential information would accidentally leak into the public domain, where it could have negative consequences for CalPERS or financial markets.
“In this age where it’s easy to share information and there’s a risk to the organization of confidential information being shared even as inadvertently as being in someone’s garage, then that poses a risk to the organization,” Mathur said.
She and Brown sparred in March, when Mathur reprimanded Brown for allowing a visitor into the CalPERS board chambers. The visitor used a CalPERS copy machine to scan political fundraising documents.
Mathur censured Brown, citing a state law that forbids elected officials from using government resources for political campaigns. Mathur’s rebuke blocked Brown from accessing CalPERS offices except on the days in March and April when the CalPERS board held its public meetings.
Emails released by CalPERS show that Brown requested closed-session transcripts in February, writing that she needed to read them to inform herself about pending board decisions. Mathur intervened and replied Brown could read them only at CalPERS headquarters.
Brown in April also learned that CalPERS has a custom of allowing the board president to open mail addressed to other board members and determine how to reply to the correspondence.
Brown disclosed those practices to the blog Naked Capitalism and hired an attorney who has represented Naked Capitalism to protest the restrictions on her access to information.
"The possible motives for this stonewalling do not reflect well on CalPERS, in that this harassment is at best a petty campaign against a reformer who succeeded in ousting an incumbent, and at worst is a reflection of your personal desire to keep your and CalPERS 'dirty laundry' so well secret that Brown cannot even conduct needed oversight in future closed sessions," Brown’s attorney, Jim Moody, wrote to the board.
Outside of CalPERS headquarters, retiree and labor groups are trying to figure out whether the conflict will prove to be a costly distraction for the underfunded pension system.
James McRitchie, a longtime CalPERS watcher and one-time candidate for the board, said he was inclined to back Brown because she’s requesting information she should have as an elected board member.
Yet he stopped short of giving her his full support. “I’m happy to do so, but I also want to make sure she makes every effort she can to work things out with Priya without further escalation. Both of them seem to be hard-headed.”
Terry Brennand, a senior lobbyist for Service Employees International Union California, opposed Brown’s campaign and argued that her choices so far burned bridges with her new colleagues on the board.
"There's information that my board members can't share with me. She seems to not be bound by any of the confidentiality restrictions. I don’t know how you can do business with board members when they don’t trust you,” he said.
Brown's conflict with Mathur echoes former CalPERS board member J.J. Jelincic's complaints about board policies. Jelincic was reprimanded last year by Feckner for leaking information to news outlets. Jelincic agrued that the board disciplinary process lacked transparency.
"Board members have offices in the back of the auditorium. To lock a member out of their own office is to interfere with an elected
state official doing their job," he wrote in an email to The Bee, criticizing Mathur's punishment of Brown.
Other CalPERS board members were guarded in their comments about Brown and Mathur. They're scheduled to review their own governance policies at their meeting next month, incuding discussions about whether the CalPERS board president should continue to be able to read other members’ mail, and whether board members should be able to review closed-session transcripts outside of the CalPERS headquarters.
“It’s up to the board to decide how much risk is appropriate,” Mathur said.
Board member Bill Slaton said the public disagreements were not “irreversible.”
“I think that any organization as large and complex as CalPERS is going to have disputes and is going to have from time to time conflict. That is all the more reason for us to put as much effort as possible into resolving disagreements in ways that advance the mission of CalPERS,” he said.
New board member David Miller viewed the conflict as a learning curve for Brown and Mathur. He considered Mathur's reprimand to Brown as an "extremely judicious" message not to bring visitors into restricted areas again.
He and other board members said they'd like CalPERS to hold an open discussion on how board members are disciplined.
"The board doesn’t really have clear, systematic tools to deal with those issues," he said.
Mathur said Brown was not intentionally locked out of her office at this month’s board meeting, when Brown filmed the YouTube video. Rather, Mathur said, it was a technical glitch that CalPERS corrected when it learned Brown could not use her office.
She and Brown were supposed to have a one-on-one meeting in Southern California this week. Brown cancelled the meeting. They haven’t rescheduled.