The new president will take over just as CalPERS fights for its life. Under a proposal endorsed by Governor Arnold Schwarzenegger, future government employees in California would be put into private 401(k)-like accounts, rather than the traditional pension plans that CalPERS manages. If the governor's plan goes through, the well-known activist pension fund would eventually wither away.
A source close to CalPERS tells BusinessWeek Online that Feckner, presently serving as acting president, will get the nod from his peers, thanks to some behind-the-scenes politicking. In exchange for supporting Feckner, more independent members of the board will see two of their own get prominent positions. Robert F. Carlson, a retired chief counsel of the California Transportation Dept., will get the vice-president's position. Another longtime CalPERS board member, Charles P. Valdes, will head the powerful investment committee.
SHORT TERMER. Valdes did not return a phone call seeking comment. Feckner confirms only that he's a candidate for president. Carlson denies that there's any predetermined winner. "There's no dealmaking," he says. "You can't categorize this as 'who's union and who's not.' It's who's the best person for the job."
The new president replaces Sean Harrigan, a controversial union leader who was voted out of his CalPERS board seat in December by fellow members of California's State Personnel Board. At the time, Harrigan said a right-wing cabal led by Schwarzenegger had conspired to kick him out of the job. The governor's office denies the claim.
During Harrigan's less-than-two-year tenure, CalPERS fought for changes in Securities & Exchange Commission rules that would make corporate board seats more accessible to outsiders, a move many companies resisted. The fund also tried, unsuccessfully, to oust Safeway (SWY
) Chairman and Chief Executive Stephen Burd shortly after a nasty supermarket strike. Harrigan is a supermarket union executive.
BETTER RETURNS. CalPERS made a name for itself in the world of corporate governance by attacking managements at poorly performing companies, but now CalPERS itself is under attack. Schwarzenegger is raising money nationwide from probusiness sources to back putting his proposal on a November ballot. CalPERS' defenders -- labor officials and board members such as California Treasurer Phil Angelides -- are marshaling support from out-of-state corporate-governance experts and public officials such as New York State Comptroller Alan G. Hevesi. Financial help to thwart the governor will also likely come from labor unions nationwide.
Ironically, the challenge to CalPERS' existence comes just as the fund is reporting much stronger investment returns. Last year it earned 13.5% on its assets. The average large pension fund rose just 11.6%, according to Wilshire Associates, an investment consulting firm.
Board member Carlson says CalPERS has learned from its experiences in recent years and will be more targeted in its corporate-governance efforts. Last year CalPERS received widespread criticism for challenging board-member elections at hundreds of companies, including Coca-Cola's (KO
) nomination of investment legend Warren Buffett. CalPERS was protesting boards that allow their auditors to also earn consulting fees, a conflict of interest.
The new president at CalPERS will have to walk a fine line between carrying on the fund's historical fights for shareholders' rights without angering the business interests that could write checks in support of Governor Schwarzenegger's plan to evenually end CalPERS' existence. Palmeri is a correspondent in BusinessWeek's Los Angeles bureau