Dual Execs at CIRM Severely Weaken Oversight, CIRM Directors Told

California's top fiscal officer today called on directors of the state's $3 billion stem cell agency to overhaul the role of its chairman, declaring that oversight of the enterprise is "severely compromised" when the chair is part of management.

In a letter to the 29 members of the CIRM board of directors, State Controller John Chiang said,

"It is difficult to uphold the appearance of accountability and objectivity when the board chair is involved in both management and oversight of CIRM's operations. In essence, under the current co-executive model, the chair is responsible for evaluating much of the work of the chair."

CIRM directors meet tomorrow in Burlingame to discuss the selection of a new chair to replace Robert Klein, who is its first and only chairman. Proposition 71, written by Klein and a handful of associates, legally gives the chair overlapping responsibilities with the president, a situation that has created friction in the past. Klein has additionally reached deep into the organization to deal with relatively minor matters.

Chiang said,

"The (directors') most important role – to provide independent oversight of the California Institute for Regenerative Medicine management – is severely compromised when that management includes the (board) chair."

Chiang, a Democrat, is one of four state elected officials who can nominate candidates for chair of CIRM. Chiang is also the head of the only governmental entity specifically charged with financial oversight of the agency. Last fall Chiang nominated Art Torres, co-vice chair of CIRM, to replace Klein, whose term has expired. Torres declined to run following a flap that arose when Klein tried to engineer the selection of his successor.

Chiang noted that principles of good corporate governance call for boards to "be objective and distinct from management."

Chiang continued,

"I understand that part of the concern in moving to an oversight function from the co-executive model is the need for the chair to have expertise in certain areas as bond finance or the process of moving research to commercialization. Corporations and public agencies throughout the nation hire that expertise rather than rely on the chair."

A representative from the controller's office is expected to appear before the CIRM board at its meeting in Burlingame tomorrow. Remote locations in Irvine and two in Los Angeles are available where the public can participate in the meeting. Specific addresses can be found on the agenda. Instructions for listening to the Internet audiocast also can be found on the agenda.

(Ron Leuty of the San Francisco Business Times has also written about Chiang's letter. Leuty's article can be found here.)