The problem of the development of effective retirement plans is very important today, when many people face a risk of losing means for living as they lose their job or retire. Often the retirement means the loss of health care insurance, which could have been covered, at least partially, by an employer and consistent drop in the level of income individuals are accustomed to. In such a situation, employees working in the public sector are particularly vulnerable to the risk of losing their financial ground after the retirement because existing compensation plans are imperfect. Nevertheless, today, it is possible to trace the appearance of CalPERS and similar initiatives, which aim at providing public employees with certainty in their future after the retirement and offering them effective compensation plans that can cover basic needs of public employees after their retirement.
In fact, CalPERS is the largest US public pension fund that aims at the advancement of financial and health security for all who participate in the System (Global Principles of Accountable Corporate Governance, 5). CalPERS is destined for employees working in the public sector and provides them with an opportunity to choose the proper compensation plan that meets their needs and expectations and provides them with the possibility to maintain high standards of living after their retirement. In such a situation, CalPERS initiative is very important for the development of the national pension system because it opens the way for the development of similar projects to provide public employees as well as employees working in private sector with effective compensation plans. In such a way, CalPERS opens larger opportunities for employees to have stable financial position after their retirement.
In this regard, fundamental principles of CalPERS are very important for the reliable and effective performance of the system and its positive impact on the development of the national retirement system. At this point, it is possible to single out the principle of transparency, which is one of the main principles of CalPERS (Global Principles of Accountable Corporate Governance 7). In fact, transparency is extremely important for the public pension fund because it provides all shareholders with the possibility to control the performance of the fund and its operations. In actuality, functioning of any pension fund is naturally associated with certain risks because the misuse of funds or poor financial management may lead to considerable financial losses of the fund, whereas financial losses of the fund mean considerable losses for shareholders, i.e. employees, who count on the pension after their retirement. To put it in simple works, if the fund fails, its shareholders will have nothing to live on because they will have no pensions and, thus, no means to live on. Therefore, transparency makes operations of CalPERS comprehensible and controllable by shareholders. The public can be certain in the reliable and stable performance of CalPERS due to its transparency.
At the same time, CalPERS suggests introducing the code of best practice, which seems to be a good initiative at first glance (Global Principles of Accountable Corporate Governance, 7). However, it is obvious that the code of best practice refers rather to the ethical field than to the legal field. In other words, the code of best practice does not necessarily imply any legal liabilities of the fund, in case of violation of the code’s norms.
Thus, CalPERS is an important public pension fund that offers better opportunities for public employees to maintain high standards of living after their retirement.
Global Principles of Accountable Corporate Governance. 2010. Retrieved on November 20, 2011 from http://www.calpers-governance.org/docs-sof/principles/2010-5-2-global-principles-of-accountable-corp-gov.pdf