State of California
Pension funds must work harder than ever to restore confidence in pensions and financial institutions because of headline-making corporate fraud cases, California State Treasurer Phil Angelides said during his keynote address.
“Pension fund managers have both the opportunity and the obligation to restore investor confidence,” Angelides said. He suggested that today’s pension problems are larger than a few prominent corporate fraud cases.
During the 1990s Americans adopted a “get rich quick” mentality, Angelides noted, that replaced the traditional belief that solid retirements are the result of saving and investing wisely over time. That’s one reason, he said, why confidence in the economy and in pension funds has been damaged.
Angelides suggested that the decline in investor confidence is related in part to the inflation in CEO salaries. He noted that in 1980 the average CEO made 42 times the salary of the typical American worker; by 2000 that ratio has exploded to 531 to 1.
To restore investor confidence, Angelides offered a five-point action plan. As a fundamental part of that plan he encouraged pension fund managers to support a strong federal regulatory process. He encouraged NCPERS’ members to become advocates for reform so that investors can once again face manageable market risks, not risk in corporate fraud.
Without a new era of activism, Angelides said, an opportunity for lasting reform and progress will be lost. He said shareholders must send a clear message that they will not tolerate corporate malfeasance. Therefore, California will no longer do business with the two dozen corporations that have recently reincorporated offshore to avoid paying taxes. Angelides’ office is also supporting shareholder resolutions that would require these same companies to return their corporate address to the United States.
“We have not used our power and our voice,” Angelides said. “We must be as committed to corporate responsibility as we are to being pension fund managers. We must actively support corporate policies that reward the creation of long-term value using incentive-based compensation.”
Mr. Angelides, 49, is a graduate of Harvard University and a Coro Foundation Fellow. He served from 1975 to 1983 in California government, gaining a reputation as a leader in the affordable housing, urban planning, and public finance fields.
He entered the private sector in 1984 and, in 1986, formed his own investment and management business. He was first elected treasurer in 1998.