Business Initiatives Guide Our Work

All our diversity and inclusion work is guided by our strategic business initiatives, which represent one aspect of our overall strategic plan for the enterprise. Listed below are fiscal-year accomplishments articulated throughout the report. Of special note are the five-year highlights given that 2020 is the end of the five-year business initiative cycle.

2019-20 Fiscal Year Accomplishments

• Expand Diversity & Inclusion (D&I) Program: Sustain the strategy to embed diversity and inclusion as an enterprise comprehensive approach to be a leader in best practices and to meet organizational goals
• Associated Strategic Measure: Employee Engagement survey results and action items for diversity and inclusion
• Established Diversity & Inclusion Council to guide enterprise-wide diversity and inclusion efforts
• Expanded education and training to all team members
• Developed new employee survey to capture self-identifying demographic data

Five-Year Accomplishments

• Established a common diversity and inclusion language including key terms, vision, and mission
• Developed and implemented a comprehensive enterprise D&I Strategy to meet organizational goals and position CalPERS as a best practice leader
• Achieved year-over-year improvement for the D&I Strategic Measure since the initiation of the Expand D&I Business Initiative in 2016

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Overview

The 2019-20 Commitment to Diversity & Inclusion Report frames our fiscal-year accomplishments around three focus areas: Talent Management, Education, and Communication. It also highlights the work of our Investment Office to engage companies that we invest in about the importance of diversity and inclusion for long-term value creation. Additional engagement activity included in the report addresses our vendor contracting practices as well as the work of our health program around health care equity. Finally, the report examines the detailed diversity and inclusion activities across the organization led by the CalPERS Diversity Outreach Program to aid employees through employee resource groups, accessibility efforts, and ongoing communication and outreach efforts.

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Talent Management

Diversity and inclusion play a central role in CalPERS’ ability to recruit and retain top talent and empower team members to deliver quality customer service to our members. With the COVID-19 pandemic came a heightened importance of diversity and inclusion practices to find creative solutions of every kind to support team members’ changing needs.

2019-20 Fiscal Year Accomplishments

• Held daily COVID-19 executive huddles that identified real-time issues impacting our workforce, coupled with daily communication to consistently share factual information, and resources to help team members with work-life balance issues such as The Families First Coronavirus Response Act leaves, Emergency Paid Sick Leave, and Emergency Family Medical Leave Act
• Implemented a new employee survey tool for self-identifying information including:
  • Eight new ethnicity categories
  • Sexual Orientation and Gender Identity (SOGI)
• Conducted ongoing pulse surveys to gather data on emerging topics, such as COVID-19
• Transitioned in-person Career Services consultations successfully to virtual consultations to continue aiding team members looking for support to advance their career
• Launched CalPERS Upward Mobility Program, designed to help team members in their goals of promoting within the organization
• Recruited 37 new hires with outreach through LinkedIn
• Hired 18 student assistants in collaboration with University Enterprises, Inc., CSU, Sacramento, and UC Berkeley
• Developed CalPERS' Investment Associate Student Program

Education

CalPERS Diversity Outreach Program (CDOP)

CDOP leads the work of the diversity and inclusion business initiative across the enterprise, which was amplified by many disruptive crises. COVID-19 alone was enough to derail productivity and negatively impact mental health. In response, CDOP worked with teams across the enterprise to collaborate on supportive services, share direct employee feedback with leaders, and develop specific resources to address evolving circumstances.

2019-20 Fiscal Year Accomplishments

• 520+ team members in 13 different divisions participated in diversity and inclusion training
• 1,960 team members participated in enterprise-wide Unconscious Bias training, facilitated by Dr. Tyrone A. Holmes, Ed.D.
• 117 team leaders attended a Quarterly Leadership Development Workshop titled “The Diverse Mind: Mental Health in the Workplace”
• Published numerous intranet webpages with relevant reading material to raise awareness of the issues
• Provided useful tools to help team leaders facilitate productive conversations with their teams

Communication

Ongoing communication with team members and stakeholders is a top priority for CalPERS. The more we provide open, transparent information, the more we can build trust. Applying diversity and inclusion principles to our communication leads to authenticity and trustworthiness. It’s a cornerstone of building relationships with those we serve.

A significant new development to further embed and communicate diversity and inclusion issues was the establishment of the Diversity & Inclusion Council. Led by the Chief of Stakeholder Relations, who oversees the CalPERS Diversity Outreach Program, the Council is made up of key leaders and team members from multiple divisions across the organization. The Council’s sponsors include the Interim Chief Diversity & Inclusion Officer, the Chief Operating Officer, and the Deputy Executive Officer for Communications and Stakeholder Relations. The CalPERS Employee Resource Groups are also represented. The work of the Council is focused on exploring innovative ways to implement diversity, equity, and inclusion practices that will continually enhance the CalPERS culture, drive internal engagement with organizational priorities, and effectively interact with CalPERS members and those we conduct business with.

2019-20 Fiscal Year Accomplishments

• Launched weekly CEO webchats to facilitate ongoing engagement with CalPERS team members about the pandemic and organizational priorities
• Implemented digital D&I Newsletters on a variety of topics to help cultivate a high-performing, risk-intelligent, and innovative workplace
• Provided guidance and shared best practices with other state agencies for diversity and inclusion program development including CalHR, CalTrans, California Community Colleges Chancellors Office, Department of Industrial Relations, and Department of Motor Vehicles
• Helped develop the Statewide Committee on Diversity, Equity, and Inclusion

Engagements

Investment Office Corporate Board Diversity & Inclusion Initiative

In August 2016, our Board’s Investment Committee adopted the Total Fund Governance & Sustainability Five-Year Strategic Plan, which identified improving corporate board diversity and inclusion as one of six strategic priorities of the Investment Office. The objective of this initiative is to improve corporate board diversity to enhance our total fund performance.

Board diversity is one of the three pillars of board quality as defined in our Governance & Sustainability Principles. Here are some of the key findings:

• Studies continue to indicate that greater board diversity can lead to lower volatility and better performance
• Using six diversity elements, including age, gender, and ethnicity, Bernile et al., found that diverse boards fostered more efficient risk-taking, invested more in research and development, and had greater innovation output per dollar invested
• A 2020 McKinsey & Company study found that companies whose boards are in the top quartile of gender diversity are 28% more likely than their peers to outperform financially
• In previous years, while the correlations were positive between board gender diversity and outperformance on earnings before interest and taxation (EBIT) margin, they were not statistically significant; now they are (Diversity Wins – How Inclusion Matters)
• Credit Suisse found excess returns of 3.5% per year between 2005-2015 for companies with at least one woman on the board

Our long-term goal is to ensure that all public companies we invest in have a level of board diversity that reflects each company’s business, customer base, workforce, and society in general. Through our corporate engagement process, we advocate for board diversity in terms of skill sets, gender, age, nationality, race, sexual orientation, gender identity, historically under-represented groups, experiences, thoughts, perspectives, and competencies.

2019-20 Fiscal Year Accomplishments

• Made progress in improving corporate board diversity including:
  • Succeeded with 67% of companies engaged since July 2017 to add at least one diverse director to their boards (492 of 733 companies)
  • Met our three-year Key Performance Indicator (KPI) from the Total Fund Governance & Sustainable Investments Strategic Plan adopted by the Investment Committee in August 2016 to have all S&P 500 companies have at least one female director on their boards (met the KPI in July 2019)
  • Continued our partnership with CalSTRS and LACERA on the California Board Diversity Initiative to improve board diversity at California-headquartered companies
• Held directors at the companies we invest with accountable for lack of progress on improving corporate board diversity:
  • Voted “against” 164 directors at companies where diversity engagements did not result in constructive outcomes. By comparison, we voted against 314 directors in 2019 and 468 directors in 2018
• Initiated CalPERS’ Diversity Director “Vote No” campaign targeted at 23 companies with multi-year unresponsiveness:
  • Resulted in 14 companies either adding or committing to add elements of diversity to their boards
  • Ran public “Vote No” campaigns with proxy solicitations at nine companies and voted against 29 directors—seven directors received more than 20% opposition, with one director failing to receive majority support
• Achieved market-wide improvements in corporate board diversity resulting in:
  • 93% of Russell 3000 companies now have at least one female director compared to 78% in Q2 of 2017 (Source: Q2 2020 Equilar data)
  • 23% of Russell 3000 board seats are now held by women compared to 16% in Q2 of 2017 (Source: Q2 2020 Equilar data)
  • 59% of new independent directors at S&P 500 companies are women and minority men (Source: 2020 U.S. Spencer Stuart Board Index)

Disabled Veteran Business Enterprises (DVBE) & Small Business/Micro Business (SB/MB) Contracting

Since 2005, CalPERS has honored a commitment to award 3% of all eligible competitive contracts and procurements to DVBE contractors and establish an overall SB/MB contract participation goal of 25%, in keeping with state public contracting laws.

With the COVID-19 pandemic came the need to ensure a safe remote work environment for approximately 80% of our workforce by equipping team members with personal computers and laptop devices to work from home. The Information Technology Services Branch (ITSB) focused its efforts on DVBE providers when procuring software and hardware purchase orders. It also focused on the SB/DVBE Advocate’s ongoing efforts to ensure SB/DVBEs were considered for all eligible contracts and procurements. This resulted in CalPERS exceeding both DVBE and SB/MB goals, shown below.

2019-20 Fiscal Year Accomplishments

• Awarded 15.94% of all contracts to Disabled Veteran Business Enterprises – a 10.34% increase over Fiscal Year 2018-19, far exceeding the goal of 3%
• Awarded 25.94% of contracts to SB/MB organizations – a .94% increase over Fiscal Year 2018-19, just above the goal of 25%

Health Policy & Benefits

We launched a new business plan initiative for Fiscal Year 2020-21 to surface and root out health and health care inequities. We are committed to ensuring that care is individualized and equitable for all members, regardless of race, ethnicity, language, sexual orientation, and gender identity. This is important not only for people who currently need or receive treatment, but also for those who are working to stay healthy.

We incorporated sexual orientation and gender identity questions in the 2020 CalPERS Health Plan Member Survey, and are in the process of engaging with stakeholders to obtain data regarding race, ethnicity, language, sexual orientation, and gender identity. The data will be used to better understand the impacts and potential solutions to guide decisions that ensure health equity for all CalPERS health members.

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