The New Colossus
Why California Matters
CalPERS is the largest pension fund in the nation, holding $180 billion, and it is indeed trying to "strong-arm" companies--scores of them--into making reforms. Angelides has become a favorite target of the corporate critics--and a visible point man for pension-fund activism--because he sits on the boards of both CalPERS and CalSTRS (California State Teachers Retirement System), the country's second-largest, with holdings of another $125 billion. Angelides has pushed both funds to adopt a whirlwind of reforms--dumping tobacco stocks, blacklisting ten "emerging markets" that ignore international labor standards, redeploying capital to neglected sectors like inner-city redevelopment and innovative environmental technologies, and, above all, peppering scores of corporations, banks, brokerages, financial markets and federal regulators with critiques and demands for change.
Angelides has only one vote among the numerous board members at each pension fund, but he regularly prevails because his partner in reform is organized labor. Sean Harrigan, the regional director of the United Food and Commercial Workers, was, until very recently, the CalPERS board president. Alert elements in labor--unions led principally by the Service Employees (SEIU) and State, County and Municipal Employees (AFSCME)--are closely involved, mobilizing grassroots support and lobbying the policy-makers. Harrigan and Angelides have collected a lot of enemies, one might say, in all the right places. "The old holders of capital--the old status quo--are very nervous about this discussion of capital and the larger context of what's good for the economy," Angelides warns. "They don't want these questions asked. They don't want the old order to be changed. They want to control capital and they want to control it to their benefit, not to the larger economy's."
Harrigan tried to downplay the conflict, suggesting the trustees were simply advocating "corporate governance" improvements, as they have done for years, to better align corporate managements with the interests of the corporate shareholders. "We think we are having an impact on the marketplace and influencing the way companies behave, at least on the margins," Harrigan told me. "There's been some marginal progress--that's all it is."
His opponents, it became clear, did not buy bland reassurances. In early December Harrigan was abruptly ousted from his position--whacked through an obscure maneuver at the State Personnel Board that reformers attributed to business-financial lobbyists allied with right-wing Republicans and assisted by Governor Arnold Schwarzenegger. The governor denied any role, but he followed up a few weeks later by proposing legislation to begin breaking up CalPERS into private personalized accounts similar to 401(k)s, thus dispersing its financial power and diluting its ability to exercise reform leverage.
What had been remote skirmishes over esoteric financial rules suddenly became a very visible political fight. To Angelides, the collision was fundamental and inevitable. "Look," he says, "in the course of a reform movement, you are going to rattle some cages and upset some people who have power. But if you're not willing to do that, what good are you as a reformer?"
Neither the treasurer nor his colleagues on the two pension-fund boards appear to be backing away from the fight. Two weeks after Harrigan was dumped, CalPERS trustees adopted another new labor-backed investment policy, this time against investing in corporations that profit by privatization of public services and jobs. "We are just beginning to have an impact on the ethos, the thinking, the culture in corporate America and the financial markets," Angelides says. "Why would we stop now? Not on my watch, we're not."