Among other changes, CalPERS' proposed updates to its Governance and Sustainability Principles include a new Board Responsibilities principle on Corporate Culture (B.7(d) on page 15), and expand the Human Capital Management Practices principle (B.16 on page 22) to include "harassment of any kind including, sexual harassment."
The proposed Corporate Culture principle, which is responsive to the Board's request and informed by CII's recently-released How Corporate Boards Can Combat Sexual Harassment (reported on here), is particularly noteworthy:
- Corporate Culture: Boards should have an active role in setting a high-performance corporate culture, which includes: respectful treatment of employees; efforts to promote diversity, inclusion and innovation; providing a workplace free of sexual harassment and other forms of harassment; fostering trust between employees and management; and promoting ownership and accountability for an ethical corporation.
- Policy: The board should develop and disclose its efforts around establishing effective corporate culture, including its anti-harassment policy, and the mechanisms through which the board learns about employee complaints and how the claims are addressed. CalPERS supports voluntary arbitration in company policies.
- Board Oversight: Boards should have oversight of the following: a) Review of the company's policies, practices and executive responsibilities related to corporate culture; b) Implementation of effective corporate culture
- Disclosure: Companies should ensure all settlements are reported to the Board. Financial reporting standard setters generally require disclosure of material settlements, including those involving sexual harassment. CalPERS supports settlements, including sexual harassment, involving an executive or member of the board to be disclosed.
Next Steps: Subject to its Investment Committee feedback on April 16th, the proposed revisions will be incorporated into CalPERS' Total Fund Investment Policy, which will be reviewed with the Committee in May.