Social Security Reform on a Small Scall (CALPERS)

Looks like the Republicans are going to try to start small, and are going to try to privatie CALPERS, the California State Pension System. They want to start in California, because the enormous size of CALPERS allows it to make bold statements, like choosing the side of workers in the recent Southern California supermarket busboy strike, where CALPERS threw it’s weight behind the baggers, causing massive stress on the CEOs of Safeway and others. Republicans don’t like it, especially since these highly paid CEOs are some of their greatest donators.

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Political Foes Target Calpers with Pension Reform
Sat Jan 1, 2005 11:02 AM ET

By Jim Christie

SACRAMENTO, California (Reuters) – California’s state pension system, Calpers, would be partly privatized under a Republican proposal that critics charge is a covert attempt to undercut the influence of the pension giant and curb its political activism.

State Assembly Member Keith Richman says his bill would save California’s public pension system from unfunded liabilities in the tens of billions of dollars by directing new public employees into 401(K)-style individual accounts.

But critics charge the proposal is aimed at curbing the influence of the California Public Employees’ Retirement System, which is known for its strident shareholder activism.

Mirroring the Bush administration’s moves to move Social Security money into private accounts, Richman’s bill would place California’s new public employees in defined-contribution retirement plans, which individuals manage on their own.

Analysts say Richman’s bill reflects anger among GOP lawmakers and business allies over the $177 billion fund’s wide-ranging activism, including hard-line proxy votes, noisy bids to oust executives and taking Detroit automakers to task for opposing California’s strict tailpipe emission standards.

“Calpers has done a lot of good for the governance movement, but they’ve become political,” said Peter Gleason, an officer with the National Association of Corporate Directors.

Additionally, Republican lawmakers believe Calpers’ board has become a soap-box for Democrats, in particular board member and California Treasurer Phil Angelides, analysts say.

“What you hear about Angelides is what you hear about (New York Attorney-General Eliot) Spitzer, but not as loudly,” said James Hawley, co-director of the Center for the Study of Fiduciary Capitalism at St. Mary’s College of California. “They’re bound to be lightning rods.”

MUTING THE MEGAPHONE

Angelides is one the harshest critics of excessive executive pay, just one of the many complaints the Calpers board has lodged against corporate America in recent years.

“It’s a political megaphone and it’s getting noticed,” Jack Pitney, professor of government at Claremont McKenna College, said of the fund’s board.

Republican lawmakers also believe Calpers’ activism presses a union agenda instead of a shareholder agenda. Some Calpers supporters say union and shareholder agendas can mesh to force corporations to change how they do business, creating value for stockholders in the process.

Under outgoing board president and union official Sean Harrigan, Calpers threw its weight behind his union during its long labor action against Southern California supermarkets, vilifying the chairman of the Safeway Inc. grocery chain in the process.

“Harrigan was a very public, and perhaps the best known, advocate for shareholder responsibility,” said Teamsters lobbyist Barry Broad. “There will be no more Sean Harrigans if Calpers is turned into a defined contribution plan.”

Harrigan helped push for reforms at the New York Stock Exchange and Walt Disney Co., becoming a major figure in the year’s efforts to influence corporate governance changes.

Like Social Security, Calpers’ defined-benefit plan manages members’ money and provides fixed payments to retirees. It relies in part on members’ contributions to sustain itself.

By depriving Calpers of new members, Richman’s bill would “neuter” the activist fund, according to Bob Stern, president of the Center for Governmental Studies in Los Angeles.

Union allies will press Democrats in control of California’s legislature to scuttle the bill to prevent it from supporting White House plans for allowing private accounts within Social Security, Broad said.

“Public sector unions will be fiercely opposed to this and private sector unions will be fiercely opposed too because they will see this as the opening salvo in the debate at the federal level,” he said.

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