When the CalPERS Board of Administration comes together for its regular three-day monthly meeting starting Monday, the agenda will include the annual performance review for the pension fund’s chief executive, Marcie Frost.
This won’t be any ordinary review. Or to put it bluntly, it shouldn’t be an ordinary review.
That’s because questions have been raised publicly about Frost’s educational experience. Frost doesn’t have a college degree, but that’s not the issue; it’s whether, when she was recruited and interviewed for her job, she misrepresented her enrollment in a higher-education program aimed at garnering her baccalaureate and master’s degrees.
The board seems poised to examine Frost’s performance behind closed doors, as a personnel matter. But the California Public Employees’ Retirement System manages $360 billion in pension assets for 1.9 million workers and health coverage for 1.4 million workers and their families. When its board turns its attention to Frost’s performance or whether her current wage of $387,000 should be raised or reduced, it owes these members a full, public accounting of its considerations.
I’ve been clear from the start that I don’t have a college degree.
“Clearly the board needs to address this issue,” says Margaret Brown, a CalPERS board member. Brown says she’ll ask that the issue be placed on the public agenda for the meeting.
The questions about Frost’s background were initially aired by Susan Webber on her financial blog nakedcapitalism.com. Webber has covered CalPERS aggressively, including its botched hiring of former Chief Financial Officer Charles Asubonten, who was bounced from his post earlier this year when it emerged that his resume was full of holes (an episode that occurred entirely on Frost’s watch). The questions Webber raises are legitimate. As was the case with Asubonten, CalPERS needs to confront them directly and in detail — for its own credibility and the benefit of its members.
It has never been a secret that Frost, who was named CEO in July 2016 after a stint as director of the Washington State Department of Retirement Systems, doesn’t have a college education. A degree wasn’t listed as prerequisite when the job was posted, and CalPERS officials who participated in the hiring process say Frost didn’t claim to have one. Frost was hired, the officials say, on the basis of her record as a Washington public pension executive.
One can get a bachelor’s degree at Evergreen, and one subsequently can apply for its master’s in public administration program, according to administrators at the school. But a single program that leads to both degrees doesn’t exist.
CalPERS officials also told me that Frost had enrolled in a “prior learning from experience” program at Evergreen, in which credits toward a degree can be earned from workplace experience. But Evergreen says that’s applicable to bachelor’s degrees only, not graduate-level programs.
Participants in the prior learning program are required to take two writing courses. CalPERS spokesman Wayne Davis says Frost enrolled in the courses in 2010 but didn’t submit any writing samples “before her career took off” in Washington and she abandoned the effort.
CalPERS officials plainly would like to put these questions behind them, arguing that since Frost has been in place for two years and earned high marks as CEO, there should be no big deal about her educational credentials.
In a sense, that’s true. College diplomas don’t come with guarantees of their holders’ ability. Plenty of people without any formal education have made important contributions to their chosen fields and society at large; by the same token, not a few graduates of our most distinguished institutions of higher learning have led entirely discreditable careers.
Davis says Frost told Heidrick & Struggles that she had enrolled at Evergreen in 2010, and still harbored the goal of receiving her diplomas. Yet if Frost inaccurately suggested at any point along the line that she was enrolled in a program that doesn’t exist, that’s a serious matter calling her integrity into question. (Even business executives with long tenures at the top and distinguished records of accomplishment have lost or given up their jobs for padding their resumes.)
CalPERS has tied itself up in knots trying to deflect concerns about Frost’s background. The fund’s communications staff say they blame themselves for any confusion. “I take accountability for what’s in that press release,” Davis says.
But that’s not an acceptable answer. It’s implausible that the communications office simply fabricated the assertion that Frost was pursuing a dual bachelor’s and master’s degree at Evergreen in 2016. More recently, the communications office has pointed a finger at Heidrick & Struggles. According to a document Webber reproduced, Heidrick & Struggles informed CalPERS in 2016 that Frost was “currently matriculated in a dual degree program” for a bachelor’s and master’s degree at Evergreen. But where did that impression come from?
A Heidrick spokesman declined to comment about that. But it’s hardly unreasonable to conjecture that the claim that Frost was enrolled as of 2016 in a nonexistent dual program came from Frost herself.
Another mystery is how the claim persisted so long in public, if it was not true. On the CalPERS website, the claim appeared on Frost’s bio page as recently as Dec. 19; the bio was subsequently revised to remove the reference. It also appeared on the archived version of the press release announcing Frost’s appointment until Tuesday, when we brought the language to CalPERS’ attention.
Several members of the CalPERS board have spoken up in Frost’s defense. Says Richard Costigan, who sits on the CalPERS board ex officio as a representative of the State Personnel Board and participated in Frost’s job interviews, “I’m still trying to figure out what the issue is, other than this press release that talks about pursuing the dual degree.”
Costigan says he has been “blown away” by Frost’s performance on the job. “In Sacramento I hear from legislators, policymakers and interest groups all the time about CalPERS and I only hear great things about her.”
On Tuesday, the pension fund circulated a “letter of support” signed by 27 CalPERS division chiefs attesting that it is “refreshing and reassuring to have a CEO who is sensitive to and supportive” of the staff and condemning the “divisive personal attacks in the media.”
But the questions raised about Frost aren’t attacks on the CalPERS staff or its mission. Nor has Frost’s tenure been spotless. The Asubonten case was a spectacular failure in governance, if not a demonstration of pure incompetence, and the responsibility belongs to Frost.
Asubonten took office as CalPERS’ chief financial officer in September 2017; the press release announcing his hiring said that “most recently, he was the managing director in a private equity firm.” Any reasonable due diligence performed before he was hired surely would have revealed that he didn’t have all the experience he claimed and that the experience he did have didn’t come close to qualifying him to be the CFO of the largest public pension fund in the country. The “private equity firm” was a mail drop outside Washington, D.C., and he had bestowed the title of “managing director” on himself.
When questions had first emerged about Asubonten’s background in April (thanks to Webber), Frost gave him an unconditional endorsement. In a phone conversation with me, she said, “We thought Charles would be an excellent candidate, and over the last five months that has proven to be exactly true.”
CalPERS subsequently determined that Asubonten had misrepresented his work history and earnings, and let him go in May. What still hasn’t been revealed is how CalPERS, under Frost, managed to overlook misrepresentations hiding in plain sight.
There are signs of emerging discontent with the shifting stories about Frost’s hiring. Terrence J. McGuire, who represented the office of then-State Controller John Chiang on the CalPERS board for nearly eight years, wrote to board members earlier this month that he has grown “concerned that the Board may overlook the issues that were uncovered…. That would be a travesty for the organization.”
McGuire, who is retired, told me the board is “ignoring the point that she created the perception that she was undertaking efforts to get her degree.” If that wasn’t true, it needs to be documented, he says. He’s right. A board with a lively sense of its professional responsibilities would take steps to bring all the facts into the open, not circle the wagons. CalPERS long has stood for good corporate governance. Its board should do no less than what it expects of the companies in its portfolio.