CalPERS appoints first chief equity officer. Why the pension fund sees value in diversity

CalPERS this week appointed its first senior executive to oversee the pension fund’s efforts to nurture diversity in its own workforce and among the publicly traded corporations in which it invests.

The California Public Employees’ Retirement System named Marlene Timberlake D’Adamo, who joined in the pension fund in 2016, as its chief diversity, equity and inclusion officer.

CalPERS called for the new office after the May 2020 killing of George Floyd, a Black man, at the hands of a white Minneapolis office, its chief executive officer said.

The creation of the new position also follows the high-profile exit of CalPERS’ Chief Investment Officer Yu Ben Meng, a U.S. citizen who was born in China and had worked for the Chinese government in between his two stints at the California pension fund. Meng abruptly left CalPERS after an ethics complaint alleged he approved a $1 billion deal with the New York financial firm Blackstone Group while personally holding as much as $100,000 in the company’s stock.

Prior to his resignation, Meng was a target for a Republican congressman from Indiana and officials in the Trump administration who suggested CalPERS steered investments to Chinese companies. CalPERS leaders viewed the questions about Meng’s prior work in China as racist and “unfair.”

This week, CalPERS executives are participating in a diversity, equity and inclusion conference with the California State Teachers Retirement System. The pension funds view diversity as a strength in long-term investments and have been pressing corporations to appoint people of different backgrounds to their boards of directors.

They have work to do in their own organizations. A recent CalPERS survey showed Latino and Black employees are underrepresented in its investment office.

The Sacramento Bee spoke with CalPERS Chief Executive Marcie Frost about the efforts. Questions and answers have been edited for length and clarity.

What is CalPERS doing to encourage diversity on corporate boards?

If you’re a public company we want to know the diversity of your board, as well as the diversity of your teams on the corporate engagement side. We are asking those boards to become more diverse because we think that the decision-makers at that table are going to make more sustainable, risk-aware decisions if you have more diversity on those teams.

We use our proxy solicitation process as well to push forward board members who we believe would be more effective if we don’t believe that public company is listening to us or responding in the way that we think that they should be.

Human capital, diversity on boards, the way that the CEO is incented and compensated are the way that those companies remain healthy and sustainable over the long run, which really matches the fact that CalPERS pays out pensions. We pay people money, $23 billion per year. In order to continue to provide that service to public employees, we need these companies to be successful along with us.

A new law directs California-based corporations to appoint diverse directors. What does that mean for CalPERS?

There’s a lot of work to do in this space, which is why I think a bill was passed ... just to put a little push and shove into the system, because, frankly, it’s not moving at the pace that it should be.

CalPERS is still having a pretty significant voice in that push to understand why a company is not moving forward and having diversity, either in the executive team or diversity in our corporate boards.

The reason that those two teams are the most important is those are the primary decision-makers for that company. So, if you’re sitting at a table and everyone around you has the same background the same experience, you’re going to have that group think. You’re not going to be aware of all the risks.

We fundamentally believe that diverse companies will perform better, that diverse companies will also be able to retain their top talent longer. So those are two things that are critically important to the long-term success of CalPERS and the $450 billion portfolio we have here.

Did you view questions about Yu Ben Meng’s background as racially motivated?

I’ve been on the public record saying that that was a racist attack on a U.S. citizen, so I’ve already been on the record and nothing has happened since that changes my view on that.

I think it just brought additional awareness about the environment that some of our diverse professionals have to operate within that. This happened in 2020. These attitudes or these positions are still very prevalent and they’re prevalent in some of our public officials.

What are the barriers that keep the investment field from greater diversity?

Having smaller scale managers come into a portfolio like CalPERS is challenging. And so we need to figure that out. We need to figure out what is the best way that we can continue to nurture the next large asset manager, but also understand that we’ve got this scale of $450 billion that we need to invest in, we can’t do that necessarily with a lot of the small emerging managers, but that’s something that’s within our diversity and inclusion framework.

This story was originally published June 23, 2021 at 5:25 AM.