In September, the California Public Employees’ Retirement System (CalPERS) selected Theodore “Ted” Eliopoulos as its Chief Investment Officer.  This appointment was unanimously approved by the members of the Board of Administration who voted.  One member, J.J. Jelencic, did not vote because he is on paid leave from the CIO post while serving on the CalPERS board.  Mr. Jelencic, however, did not hesitate to share his views on Mr. Eliopoulos. In comments published in Pensions & Investments, Mr. Jelencic opined that Mr. Eliopoulos lacked the temperament and management skills to be CIO of the giant pension fund.

The other CalPERS board members were not pleased to read that one of their fellows was not sticking to the party line.  The minutes of board’s October 13, 2014 reflect that board president Robert Feckner read the following formal statement into the record:

The comments quoted in a recent P & I article by Board Member JJ Jelincic were unfortunate and a breach of Board Governance policy Article X, Section L, Civility and Courtesy, as well as a breach of our CalPERS core values.  The CIO is a hire of the Board of Administration, and as such this became a personnel matter.  We wish to make it perfectly clear that the decision to hire the current CIO was a unanimous decision by the 11 voting members of this Board.  We also hereby advise Mr. Jelincic to use his “Boardsmanship” hat when speaking to the media about matters that impact the system, employees of the system, or this Board.  Personal opinions are encouraged, but when the Board or Committee has made a decision, it must be respectfully acknowledged as such by all members of the Board.

This is a classic example of using the rubric of civility to stifle oppositional speech.  CalPERS, moreover, has it backwards.  The freedom to express one’s views is the hallmark of a civil society.  It is only in uncivil societies that dissent is suppressed.

Although CalPERS is a public agency that must perforce operate with a high degree of openness, this contretemps does raise an interesting question concerning the limits of board member dissent, a subject addressed by Vice Chancellor John W. Noble in Shocking Techs., Inc. v. Kosowsky, 2012 Del. Ch. LEXIS 224, 37-38 (Del. Ch. Sept. 28, 2012):

In these circumstances, a director may not put the existence of a corporation at risk in order to bolster his personal views of corporate governance.  The lesson to be learned from these facts must be carefully confined, however.  First, fair debate may be an important aspect of board performance. A board majority may not muzzle a minority board member simply because it does not like what she may be saying.  Second, criticism of the conduct of a board majority does not necessarily equate with criticism of the corporation and its mission.  The majority may be managing the business and affairs of the corporation, but a dissident board member has significant freedom to challenge the majority’s decisions and to share her concerns with other shareholders.  On the other hand, internal disagreement will not generally allow a dissident to release confidential corporate information.  Fiduciary obligations are shaped by context.  A balancing of the various conflicting factors will be necessary, and sometimes the judgments will be difficult.  Here, the most logical objective of Michael’s actions—strangling the Company with a potentially catastrophic cash shortfall—cannot be reconciled with his “unremitting” duty of loyalty.  Thus, Michael [the dissident director] did breach his fiduciary duty of loyalty to Shocking [the corporation].

While the Vice Chancellor found that Mr. Michael had breached his duty to Shocking, not much in the ruling supports CalPERS.  Shocking was a privately held corporation, CalPERS is a state agency.  Mr. Michael was found to have released confidential information.  CalPERS does not accuse Mr. Jelencic of disclosing confidential information.  Mr. Michael’s alleged objective was to strangle the company.  Mr. Jelencic apparently did no more than publicly express a view contrary to those of his fellow board members.