The CalPERS Focus List has been around for almost a quarter century.  Each spring, CalPERS "names names" by listing from 4 to 11 companies that it believes have records of poor economic and corporate governance performance.  Here is a flow-chart of the current Focus List process.

Interestingly, CalPERS did not issue a Focus List this year.  See this story by Barry Burr in Pensions & Investments. The absence of a list does not mean that CalPERS has abandoned the Focus List.  In fact, the staff is currently reviewing the Focus List methodology.   A report back to CalPERS' Investment Committee is expected before year end.

Part of that report should include a recommendation that CalPERS adopt the Focus List standards and procedures pursuant to the rulemaking provisions of the California Administrative Procedure Act ("APA").  The APA prohibits state agencies, such as CalPERS, from utilizing, enforcing, or attempting to enforce any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, which is a “regulation” under the APA unless it has been adopted in accordance with the rulemaking provisions of the APA.  Both the standards and the procedures for making the Focus List appear to run afoul of this proscription.  By complying with the APA, CalPERS will ensure that there is transparency and accountability because the public will be given notice and an opportunity to comment on the Focus List Standards and procedures.

The staff should also give consideration to whether the process for placing a company on the Focus List appears to constitute an "adjudicative proceeding" under the APA.  If so, then CalPERS is required to comply with the general provisions applicable to administrative adjudication in Chapter 4.5 of the APA.  More generally, a process by which as state agency places a business in the public stocks should give rise to considerations of due process under the U.S. and California constitutions.