Consultants, trustees discuss raising CEO incentive pay as McLaughlin shows statutory positions near market

McLaughlin Partners presented compensation survey results for CalPERS statutory executive and investment positions on April 8, showing base salaries for most roles are near market medians but total compensation gaps remain where CalPERS roles lack long‑term incentive eligibility.

Michael Oake of McLaughlin explained the methodology: executive pay comparisons used an equal weighting of leading U.S./Canadian public funds, California agencies and private‑sector asset managers; investment positions used a two‑thirds weighting to large institutional investors and one‑third to private institutions. McLaughlin’s tables showed most midpoints for base salary sit near market medians but total cash and total compensation are higher in the market for roles that receive long‑term incentives.

Global Governance Advisors reviewed the findings and recommended limited midpoint adjustments for several roles and a more material adjustment in CEO incentive opportunity. GGA noted the board made “material changes” two years ago that improved competitiveness and recommended further tweaks rather than wholesale changes now. For executives, they proposed small midpoint increases for CEO, CFO, chief actuary and the chief health director (salary only for the latter). For investment positions, modest adjustments were proposed for CIO, deputy CIO and associate investment managers.

GGA emphasized that most roles should remain primarily salary‑range changes or incentive opportunity tweaks rather than straight pay raises to incumbents. For the CEO role they proposed increasing incentive targets (short‑ and/or long‑term) to reduce the gap to market median total cash and total compensation. The consultants framed incentive increases as “risk‑mitigated” because payouts would be conditional on performance.

Trustees asked clarifying questions about peer groups (private‑sector banks and asset managers widen market medians), the calculation of market medians and how any changes would be incorporated into policy. GGA said final recommendations, including updated salary ranges and incentive opportunity levels, will return in June 2025 for committee consideration. The committee did not vote at the April meeting.