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Fiduciary training at CalPERS: legal standards, co‑fiduciary responsibilities and a recent Ohio enforcement case
Summary
Legal counsel and outside trainers reviewed fiduciary duties, governance best practices, Bagley‑Keene meeting rules, and a recent Ohio case where two trustees were found to have breached duties after undisclosed dealings with an external firm, yielding removal and other equitable remedies.
Tiffany Reeves led a fiduciary training for trustees emphasizing the duty of prudence (process focus), duty of loyalty (exclusive benefit of participants), and the duty of impartiality across beneficiary groups. She stressed the '3 P's' — process, process, process — and that courts judge the prudence of the decision‑making process, not just outcomes. Reeves described common conflicts (financial, sponsor/stakeholder pressures, employment/professional conflicts, family conflicts, use of confidential information) and asked trustees to document reasoning and follow governance protocols.
Reeves used a recent high‑profile enforcement case from Ohio (presented as a 2025 decision) as an illustrative caution. Two trustees maintained secret communications and back‑channel coordination with a prospective asset manager (QED) after internal staff and consultants had declined the proposal; the court found breaches of loyalty, prudence, transparency and governing‑document compliance, and issued equitable remedies including removal and a permanent bar for the former trustee. Reeves highlighted that attorney‑general enforcement, participant lawsuits and potential personal liability are real enforcement mechanisms and emphasized co‑fiduciary responsibilities — trustees must cooperate, maintain civility, disclose conflicts and protect board confidentiality.
CalPERS legal counsel reviewed Bagley‑Keene obligations (notice, fair agenda, public comment rules, teleconference exceptions through 2030, closed‑session exceptions such as 'considering investment decisions' and security exemptions), the special quasi‑judicial role when the board reviews administrative law judge decisions (exclusive record principle and ex parte limits), and the 2/3 vote requirement for the fraud/security closed session used that day. Counsel reminded trustees how to handle member appeal decisions, recusal and when to defer to independent board counsel on adjudicatory matters.
Public comment included retiree advocates pressing the board to explain a long‑term decline in substantive investment committee action items and questions about the scope of closed‑session uses for investment discussions.
Ending note: Trustees were reminded that governance structures, documented processes and consistent adherence to policies protect beneficiaries and reduce fiduciary risk.
