California Public Employees Retirement System corporate governance policy CalPERS strongly believes that each market throughout the world should adopt corporate governance principles that are appropriate for that market. Ideally, these principles should be developed by the markets participants themselves, through cooperative action and consensus What is CalPERS? The California Public Employees Retirement System manages pension and health benefits for more than 1,4 million California Public employees, retirees and their families. Its mission is to protect the health and financial security of its participants. We do this in three key ways: by offering innovative programs; by ensuring excellence, both in service to our members and in our financial performance; and by exercising the leadership that will allow us to influence our future. At CalPERS, corporate governance is just one of our programs that affects all three of these objectives. How is it governed? It is governed by a Board of Administration. The Board consists of 13 members and has investment authority and sole fiduciary responsibility for the management of the System’s assets.
The Board is guided by the CalPERS Investment Committee, management, and more than 150 staff in Investment Office who carry out the daily activities of the investment program. But the CalPERS corporate governance policy mostly concerns not inside management, but its relationships with the companies they invest into. Or, in other words, the companies, where they are shareholders. CalPERS considers “corporate governance” to be the “relationship among various participants in determining the direction and performance of corporations”. The primary participants are: shareholders; company management and the board of directors. We focus on these three groups. The main principles of CalPERS corporate governance are the following: accountability of the company to shareholders; transparency of information; equal treatment of investors one share is one vote.
Corporate Governance in the Era of Globalization Concept and Its Meaning Corporate governance is a process or a set of system and processes to ensure that a company is managed to suit the best interests of all. The systems which can ensure this may include structural and organizational matters. The stakeholders may be internal stakeholders (promoters, members, workmen and executives) and external ...
Besides, corporate management should have long-term strategic vision, because we believe companies that are operated with long-term shareholder returns as the primary goal will, ultimately, also reward these other stakeholders. Again, if in the long-term shareholders win, everyone else wins too A central thesis, then and now, is that shareholders must act like owners and take an active interest in the performance of their stock portfolio. Today, at the close of the century, corporate governance is still an important tool for monitoring performance and enhancing value – even though the ultimate shape of this tool is in the process of being forged. And this thesis unites CalPERS Corporate governance policy with the idea of corporate social responsibility. Though implying very diverse definitions, sometimes corporate social responsibility is defined as meeting the needs and expectations of all stakeholders. On the contrary, the definition of corporate social irresponsibility implies wide range of irresponsible actions by the company and its top management, which fall against interests of shareholders, employees and society. For example, when for a short-term, single profit a company or its manager can risk the shareholders interests.
On the other side, as far as in 1970 Milton Friedman wrote, “There is only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it engages in open and free competition without deception or fraud.” And the aim of Corporate Governance Policy of CalPERS is to help the companies it invests into to find balance between increasing profits and running fair business, desire to get more profit in short term and thinking about long-term development, i.e. a balance between corporate responsibility and irresponsibility. And, of course, not to forget about own profits to be able to provide guarantees expected by its participants. Corporate governance is simply an enhancement technique that we use to improve returns of our largely passive equity portfolio. CalPERS Board strongly believes that using a passive strategy to select stock does not mean that we have to be a passive owner. We believe that we have a duty to our participants to put just as much effort into being an active owner as in deciding to become an owner in the first place.
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And we have been successful. References. Armstrong, Scott J. Social Irresponsibility in Management. At http://www-marketing.wharton.upenn.edu/ideas/pdf/s ocial.pdf Bansal, Pratima; Sonia Kandola. Corporate Social Responsibility: Why Good People Behave Badly in Organizations. In Ivey Business Journal, at http://www.iveybusinessjournal.com/view_article.as p?intArticle_ID=404 CALPERS Governance Principles, Policies and Practices at CalPERS Shareowner Forum http://www.calpers-governance.org/forumhome.asp Sparkes, Russel. From Corporate Governance to Corporate Responsibility: The Changing Boardroom agenda.
In Ivey Business Journal, at http://www.iveybusinessjournal.com/view_article.as p?intArticle_ID=406.