The California Public Employees' Retirement System (CalPERS) is the largest U.S. public pension fund, with assets totaling $242 billion spanning domestic and international markets as of April 8, 2008. Our mission is to advance the financial and health security for all who participate in the System. We will fulfill this mission by creating and maintaining an environment that produces responsiveness to all those we serve. This statement was adopted by the CalPERS Board of Administration to guide us in serving our more than 1.4 million members and retirees.

The CalPERS Board of Administration is guided by the Board's Investment Committee, management, and more than 180 Investment Office staff who carry out the daily activities of the investment program. Our goal is to efficiently and effectively manage investments to achieve the highest possible return at an acceptable level of risk. In doing so, CalPERS has generated strong long-term returns.

CalPERS Corporate Governance Program¹ is a product of the evolution that only experience and maturity can bring. In its infancy in 1984-87, corporate governance at CalPERS was solely reactionary: reacting to the anti-takeover actions of corporate managers that struck a dissonant chord with one's sense – as owners of the corporate entity – of accountability and fair play. The late 1980s and early 1990s represented a period in which CalPERS learned a great deal about the "rules of the game" – how to influence corporate managers, what issues were likely to elicit fellow shareowner support, and where the traditional modes of shareowner/corporation communication were at odds with current reality.

Beginning in 1993, CalPERS turned its focus toward companies considered by virtually every measure to be "poor" financial performers. By centering its attention and resources in this way, CalPERS could demonstrate to those who questioned the value of corporate governance very specific and tangible economic results.²

What have we learned over the years? We have learned that (a) company managers want to perform well, in both an absolute sense and as compared to their peers; (b) company managers want to adopt long-term strategies and visions, but often do not feel that their shareowners are patient enough; and (c) all companies – whether governed under a structure of full accountability or not – will inevitably experience both ascents and descents along the path of profitability.

We have also learned, and firmly embrace the belief that good corporate governance – that is, accountable governance – means the difference between wallowing for long periods in the depths of the performance cycle, and responding quickly to correct the corporate course.

As one commentator noted:

"Darwin learned that in a competitive environment an organism's chance of survival and reproduction is not simply a matter of chance. If one organism has even a tiny edge over the others, the advantage becomes amplified over time. In 'The Origin of the Species,' Darwin noted, 'A grain in the balance will determine which individual shall live and which shall die.'  I suggest that an independent, attentive board is the grain in the balance that leads to a corporate advantage. A performing board is most likely to respond effectively to a world where the pace of change is accelerating. An inert board is more likely to produce leadership that circles the wagons."

¹ "Corporate Governance," at CalPERS, means the "relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) shareowners, (2) management (led by the chief executive officer), and (3) the board of directors." (Robert Monks and Nell Minow, CORPORATE GOVERNANCE 1 (1995).)

² See Steven L. Nesbitt, "Long-Term Rewards from Shareholder Activism: A Study of the ‘CalPERS Effect'," J. OF APP. CORP. FIN. 75 (Winter 1994): Concluding that CalPERS program generates approximately $150 million, per year, in added returns. See Mark Anson, Ted White, and Ho Ho "Good Corporate Governance Works: More Evidence from CalPERS," Journal of Asset Management, Vol.5,3 (February 204), 149-156. Also see "The Shareholder Wealth Effects of CalPERS Focus List," Journal of Applied Corporate Finance, (Winter 2003), 8-17: The authors found that between 1992 and 2002, publication of the CalPERS "Focus List" and efforts to improve the corporate governance of companies on that list generated one-year average cumulative excess returns of 59.4%. Cumulative excess return is the cumulative "return earned over and above the risk-adjusted return required for each public corporation."