We thought we would take advantage of the “waiting for the next Iran war shoe to drop” (anxious) pause by returning to another regular topic, CalPERS. You will see much more in Links, but the short version of the state of play is that Trump again made annihilation-type threats against Iran, accompanied by many accounts on Twitter of the US moving military assets in position for a big attack:
BREAKING: The U.S. is now directly posturing for a large-scale attack, with intense Air Force activity across the Middle East and particularly near southern Iran.
At least seven U.S. aerial refueling tankers are operating over the Persian Gulf, while an MQ-4C Triton conducted a… pic.twitter.com/1jAkMWuqzD
— The Hormuz Report (@HormuzReport) September 20, 2026
However, nothing major happened overnight. The trading week has started. Xi and Trump are to meet Thursday. It thus seems unlikely that the US will do anything precipitous between now and then.
CalPERS has continued in its shameful tradition of grossly overpaying Marcie Frost via unwarranted annual compensation increases. And by “unwarranted,” we mean not just the total amount but also the fact that the lofty bonus amount is not justified under her existing compensation structure.
Her total 2026 award was a $1.149,836 bonus. that plus her salary of $601,398 results in total pay of $1,751,234. That brings you to a record of 18.33% in publicly disclosed pay increases over her nine-year tenure at CalPERS.1
And those figures are not the sum tota. Frost also received a non-disclosed long-term compensation award.
Frost’s new salary for 2026/2027 is $641,250. Pray tell, since when are public officials entitled to salary increases that meaningfully exceed the rate of inflation?
To give a idea how egregious this is, I recently spoke to a litigator who was new to the pension world and had reason to look at CalPERS. The very first thing he mentioned was that the CEO was a mere high school grad yet her pay looked outrageous. To the extent that CalPERS had had decent investment performance, that was the doing Mr. Market and the Chief Investment Officer and his team, not Frost. In my day, on fiercely competitive Wall Street, CEOs regularly made less than top traders. One storied example was when Salomon CEO John Gutfreund received a total of roughly $3 million while his bond arbitrage desk chief Lawrence Hilibrand took home $23 million.
Admittedly CalPERS does pay its CIO more than Frost, but gap is out of line given her contribution to the fund’s performance. Frost regularly carries on as if she has investment acumen when she was entirely in administrative roles; one prominent CalPERS retiree regularly depicts her expertise as that of a clerk typist. Her financial disclosure, the annual Form 700, shows no securities positions. That suggests she is in mutual funds and cash.
In addition, the board has been punishing members who even dare to question these unduly rich awards. In the open meeting after the compensation decision, board member Malia Cohen, the State Controller, took the highly unusual step of lodging a public protest via her designee.
Board members met Tuesday in a closed session to discuss Frost’s performance and her incentive. Cohen’s delegate, Deborah Gallegos, read a statement before the final vote Wednesday that said the controller believed the compensation package did not reflect the full spectrum of views on Frost.
“The views of the board members with dissenting views were dismissed,” Gallegos said on behalf of Cohen. “I cannot stand behind a motion which does not equitably take into consideration all relevant factors, particularly in light of the current structural deficit in California.
We’ll turn the mike over to CalPERS retiree organization RPEA. From their press release:
CalPERS Board Misleads the Public About CEO’s $1.15 Million Bonus
CalPERS Board members are trying to justify CEO Marcie Frost’s staggering $1.15 million bonus by pointing to the fund’s 14.8% investment return.
But their own numbers expose that argument as misleading.
Only approximately $271,000—less than one-quarter of the bonus—was tied to investment performance. That means roughly $879,000 of the award had nothing to do with the fund’s investment returns.
So what exactly did Marcie Frost do to earn the other nearly $900,000?
CalPERS’ compensation policy allows bonuses to be based on broad categories such as “operational effectiveness,” “stakeholder engagement,” “customer satisfaction,” leadership, and individual business objectives. These measures are developed and approved by the same Board that ultimately awards the bonus. These measures are far more subjective than an investment returns, even though we think the returns are inflated. The policy even permits the application of a discretionary performance modifier.
The Board cannot hold up one year of market returns as justification for the entire award when investment performance produced less than 1/4 of that bonus.
And even that claim deserves scrutiny. CalPERS’ policy states that investment-related incentive payments are generally based on five-year performance against benchmarks, not simply one strong year. Much of the fund’s return also came from broad public-market gains, not from the CEO personally selecting investments or managing the portfolio. As a matter of fact, the CEO has ZERO role in the selection or management of the investments.
If the remaining $879,000 was awarded for extraordinary management performance, the public deserves to see:
Every performance objective used
The weight assigned to each objective
The actual result achieved
The threshold, target and maximum payout for each measure
Any discretionary multiplier applied by the Board
The specific evidence supporting each rating
Instead, the public is being offered a convenient headline about a 14.8% return while the overwhelming majority of the bonus remains unexplained.
This is a public pension trust fund, not a private corporation and not a vehicle for making public executives wealthy.
Retirees, workers and public employers are expected to accept higher contributions, rising costs and a pension system that remains less than fully funded. Meanwhile, the CEO receives a bonus approaching twice her annual salary.
CalPERS Board President Theresa Taylor reportedly called the increase well-earned because of the fund’s returns. But the Board’s own compensation structure contradicts that defense: approximately three-quarters of the bonus was awarded for something else.
The Board should stop hiding a nearly $900,000 management award behind investment returns. If the performance was truly extraordinary, disclose it, document it and defend every dollar publicly.
Until then, this is not pay for extraordinary investment performance. It is an extraordinary payout in search of a justification.
____
1 From another RPEA missive issued before the board meeting to decide Frost’s compensation:
RPEA Slams CalPERS’ $52M Executive Bonus Pool as CEO Marcie Frost Nears $1.5M Payout for “Meeting Expectations”
SACRAMENTO, CA — On Wednesday, September 16, 2026, at 8:45 a.m., the CalPERS Board of Administration will vote on a $900,000+ incentive award for CEO Marcie Frost, potentially pushing her annual compensation above $1.5 million.
The Retired Public Employees’ Association of California (RPEA) is fiercely challenging the vote, exposing a $52.7 million total executive incentive pool and rock-bottom performance thresholds that allow maximum payouts for mediocre results. While CEO pay has nearly quadrupled since 2017, critical internal operations are neglected and rank-and-file workers face flat wages.
CEO COMPENSATION 2017: $ 387,075 2021: $ 633,062 2025: $1,368,180 2018: $ 406,714 2022: $ 694,693 2026: $1,500,000 or more 2019: $ 444,547 2023: $ 752,661 2020: $ 489,167 2024: $1,254,419
Four Core Failures Exposed by RPEA:
Low Performance Bars: CalPERS’ incentive program awards maximum payouts for tiny, nominal improvements. A stakeholder-engagement metric hits its highest payout tier for a mere 1.5% increase, and investment metrics max out by beating benchmarks by just 0.20%.
Subjective Payouts: A massive 25% of the CEO’s evaluation relies on purely subjective criteria like “communication,” allowing boards to hand out hundreds of thousands in public funds on a whim.
Failing Infrastructure: While executive bonuses balloon to $52.7 million, the CalPERS legal department is crippled by a 40 percent vacancy rate, severely threatening system operations.
Stagnant Worker Pay: Frontline state workers are receiving no pay raises, creating a stark, unjustifiable double standard against the 300% explosion in executive pay.
This decision represents a gross misuse of public funds and a deep betrayal of the public servants who keep California running. For taxpayers, treating public trust funds like a Wall Street playground to hand out near-million-dollar bonuses for routine work is an insult. For public employees, being forced to watch a single executive’s pay quadrupled while strict salary caps block their own pay raises is entirely unacceptable. Worse, leadership is padding its own pockets while allowing severe staffing vacancies to leave rank-and-file staff overworked and under-resourced.
“I don’t blame Marcie Frost for cashing the check. I blame the CalPERS Board for failing to control costs,” said RPEA President Margaret Brown. “Bonuses should reward exceptional performance, not merely doing the job you were hired to do. Pension trust funds exist to provide retirement benefits, not to make executives millionaires.”
At least someone is getting a pay hike over the inflation rate.
Inflation being closer to 10% CAGR (long term historical return on gold) than whatever specious numbers the Fed claims! 🧐
Top tell the truth even if the investment performance had been outstanding it is difficult to justify too large pays including all those long-term, short-term and more or less capricious bonuses. You might try an exercise of Calpers with Frost or with an orangutan in her place and i bet the difference wouldn’t be detectable. Except that board meetings and day by day life in the top offices would be much more funny with teams below showing more cohesive. Her Majesty The Money needs to be de-throned. Even when taking about a money manager.