Keith Paul Bishop, a lawyer/blogger who keeps close tabs on California's Public Employees Retirement System as part of his corporate law practice, thinks it may be stretching the Bagley-Keene Open Meeting Act to the violation point in developing its corporate governance Focus List, through which it "encourages the market to reform companies and improve shareowner wealth for all owners."

He  writes today:

As I reported in this post from last November, the California Public Employees Retirement System has reworked its Focus List program.  According to this flow chart  published by CalPERS, the staff should have now completed its review of the top 500 U.S. based companies and selected 5-10 companies for what CalPERS calls “engagement”. 

CalPERS’ revamped Focus List process raises significant concerns for those who value open government and transparency.   In California, state agencies are subject to the Bagley-Keene Open Meeting Act.  . . . The CalPERS process, however, contemplates at least two closed sessions of the CalPERS Investment Committee.  It’s not clear whether the Bagley-Keene Act permits these meetings to be held as closed sessions. 

It is possible that CalPERS is relying on Government Code Section 1116(c)(16) which permits pension funds to hold closed sessions “when considering investment decisions”.   However, investment decisions would seem limited to decisions to buy, sell or vote securities and not discussions about corporate governance negotiations.

Even if these closed sessions are lawful under the Bagley-Keene Act, the act does not require that CalPERS conduct these meetings in secret.  CalPERS is therefore free to report on its Focus List “engagements” openly.   By cloaking these negotiations and discussions in secrecy, CalPERS also runs the risk that it may run afoul of California’s insider trading statute, California Corporations Code Section 25402 should it buy or sell securities of an issuer while it is “engaging” that issuer.