Archive for February, 2009

CalSTRS: more women on corporate boards

February 12, 2009

CalSTRS plans to urge corporations to put more women on their boards of directors, citing a study that says having women in the board room improves the financial performance of large companies.

“In fact, the magic number in that study is three female board members,” Jack Ehnes, the CalSTRS chief executive officer, told a Women in Investments conference in Sacramento this week.

The push for more diversity is part of a two-decade-old drive by public pension funds, and other large institutional investors, for improved “corporate governance” aimed at keeping executives focused on the interests of shareholders, not personal gain.

The California State Teachers Retirement System, with an investment portfolio valued at $126 billion at the end of December, is a rare world-class financial organization where women have a prominent role.

At recent CalSTRS board meetings, seven of the 12 voting members have been women — five regular members and two representing state Treasurer Bill Lockyer and Superintendent of Public Instruction Jack O’Connell.

The current chair of the CalSTRS board is a woman, Dana Dillon, a teacher from Weed. And four of the top seven executive staff members listed on the CalSTRS web site are women.

At CalPERS, only four or five women have been among the 13 board members at recent meetings. But last December Anne Stausbol became the first woman CalPERS chief executive officer.

Ehnes told the conference that “diversity remains a core priority of CalSTRS.” He said the current financial crisis has “reignited the debate and underscored the importance” of shareholder involvement in the process that selects corporate board members.

“One of our signature issues this year will be advocating increased board member diversity, including . . . specifically focusing on women on corporate boards later this year,” he said.

Ehnes said “a 2007 report by Catalyst found that on average Fortune 500 companies with more women on their boards turned in better financial reports than those with fewer board members.”

Catalyst is an international nonprofit organization founded in 1962 that works to increase opportunities for women in business, mainly through research. The members include more than 400 companies, firms, business schools, and associations.

At the Women in Investments conference in Sacramento, a CalSTRS board member, Carolyn Widener, drew a big laugh when she quoted from a column in the New York Times last weekend by Nicholas Kristof, a two-time winner of the Pulitzer Prize.

“At the recent World Economic Forum in Davos, Switzerland, some of the most interesting discussions revolved around whether we would be in the same mess today if Lehman Brothers had been Lehman Sisters,“ Kristoff wrote.

He said most thought the best name would have been “Lehman Brothers and Sisters.” The bankruptcy in September of Lehman Brothers, an international investment bank, was a turning point in the financial crisis.

More seriously, Kristoff wrote, “Wall Street is one of the most male-dominated bastions in the business world.” He cited a summary of economic research that found “a strong consenus that diverse groups perform better at problem solving.”

The Women in Investments conference on Tuesday (Feb. 10), attended by about 500 persons, was sponsored by CalSTRS, the California Public Employees Retirement System and the California Legislative Women’s Caucus.

Henry Jones, a CalPERS board member, told the conference that U.S. corporations have resisted increasing diversity on their boards of directors, even though research suggests that increases the effectiveness of boards.

“We believe corporate directors should not only have critical skill sets but diverse perspectives that come from having historically under-represented groups on boards, including minorities and women,” he said.

Jones said women in “our financial world” continue to lag behind men in pay and opportunity. He said that after a similar conference on diversity in 2006, CalPERS created a data base of 1,200 minority-owned financial services firm.

A study by Altura Capital found that women own some part of 253 of the firms, 45 of which are located in California. Women own 50 percent or more of 80 of the firms, including 12 in California.

“This is our starting point,” said Jones. “We have a ways to go.”

The keynote speaker at the conference, former Secretary of State and UN ambassador Madelaine Albright, was greeted by a standing ovation and received another standing ovation after she spoke.

Albright now has a firm, the Albright Group, that invests in emerging markets. She twice uttered her famous phrase that was printed on a Starbucks coffee cup and misquoted last year by Republican presidential candidate Sara Palin.

“There is a special place in hell for women who don’t help other women,” said Albright. Palin’s paraphrase: “There’s a place in hell reserved for women who don’t support other women.”

One of the conference workshops, public equity, featured two women investment portfolio managers, Mary Cotttrill of CalPERS and Trish Taniguchi of CalSTRS,

Both of the big pension funds have relatively small programs, $1 billion to $2 billion, that are intended to help small firms compete for managing part of the pension fund investments.

Some audience members were pleased to hear, in response to a question, that firms do not need to have money under management when they apply. But they do need to have a track record, working capital and a strong case for being chosen.

Cottrill said one firm that had no money under management when it applied is now managing more than $1 bill for CalPERS.

It was a man, Eric Baggesen, a senior CalPERS investment officer overseeing manager development programs, who delivered a reality check at the close of the workshop.

Baggesen said managers must deliver performance to earn fees. He also said the stock market plunge means that the pension funds may be “taking money off the table” rather than making new investments.

In addition, he said, “The government is likely to come to us. They are talking about, for example, creating a separate program for things like pension funds buying preferred stock in banks. They are talking about trying to create infrastructure pools and all the rest of it.”

But the last word at the workshop came from Jerilyn Harris, a CalSTRS board member and retired teacher. She said the main options for women when she entered the workplace in the 1960s were teaching and nursing.

“It gives me hope, and I wish you all wonderful success,” she said.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at http://calpensions.com/ Posted 12 Feb 09


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