CalPERS resignations not connected - turmoil denied

April 30, 2008

Sam Zuckerman, Staff Writer - San Francisco Chronicle

The resignation of the CEO of California's public employee retirement system, announced Monday, was its second high-level departure in less than a week, prompting speculation about turmoil at the $240 billion pension fund.

Still, the retirement of Chief Executive Officer Fred Buenrostro Jr. is a personal matter that's not part of a broader management shakeup at the California Public Employees' Retirement System, board members and outside experts said Tuesday.

Buenrostro said Monday that he is retiring at a date still to be determined after 5 1/2 years as CalPERS' top executive. The announcement followed by a few days disclosure of the departure of Russell Read, the fund's chief investment officer, who said he is leaving in June to focus on environmentally friendly investing.

"It's a normal thing to try to connect these events, but the two resignations had nothing to do with each other," George Diehr, vice president of CalPERS' Board of Administration, said Tuesday.

"Fred's was not surprising," Diehr said. "Read's was the surprise."

In his statement, Buenrostro, 58, said he is leaving to "pursue private sector opportunities." In an interview Tuesday, he emphasized that his departure comes after he has completed the management tasks he was originally hired to carry out.

"When I came to CalPERS in 2002 ... my commitment was to stabilize management and put in place a succession program," he said. "I have personally been involved in all this and, if I continued to stay on, some of those very talented individuals would not see an opportunity to move up."

CalPERS watchers said Buenrostro's departure is taking place after some board members privately called on him to change his management style and be more deferential.

"There's been lots of contention about Fred's style," said James McRitchie, publisher of CorpGov.net, a Sacramento shareholder information service. "His management style was not as participatory as it could be, not as inclusive."

Still, McRitchie said, the CEO's departure is in keeping with CalPERS' perennial problem of retaining senior managers in the public sector when they could be earning much higher salaries elsewhere.

"What's likely to have led Fred to leave is that he can go out to the private sector ... have more fun and make a lot of money," McRitchie said.

Buenrostro, who collected a little over $300,000 in salary and incentive pay last year, met with board President Rob Feckner about two weeks ago and told him of his desire to retire, according to the two officials. Both strenuously denied that conflicts with the board precipitated the resignation.

Buenrostro acknowledged that he's had "vigorous discussions" with board members, but said stories about conflict were "all very exaggerated." He stressed that it's "the board's prerogative to manage as it chooses."

CalPERS has thrived under Buenrostro's leadership. In the five years that ended in June, the fund was up at an annual rate of 12.81 percent, growing from $134 billion at the end of 2002.

Observers credit Buenrostro with preserving CalPERS' status as a defined-benefit plan with guaranteed pensions for members. They also praise him for smoothing out what had been highly volatile employer contributions.

CalPERS rushed out the Monday announcement of Buenrostro's retirement after the Bloomberg news service published a story saying the CEO might leave before the end of the year, citing internal conflicts over a plan to invest $5 billion in roads and other infrastructure projects.

The CalPERS statement referred to "erroneous speculation" about the reasons for Buenrostro's departure.

Buenrostro's resignation "wasn't connected to the infrastructure issue," Diehr said Tuesday.

FAIR USE NOTICE. This document may contain copyrighted material whose use has not been specifically authorized by the copyright owner. CorridorWatch.org is making this article available for academic research purposes in our non-commercial, non-profit, effort to advance the understanding of government accountability, civil liberties, citizen rights, social and environmental justice issues. We believe that this constitutes a 'fair use' of the copyrighted material as provided for in Title 17 U.S.C. Section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner. CorridorWatch.org does not express or imply that CorridorWatch.org holds any claim of copyright on such material as may appear on this page.