CIRM Directors Rebuff Five Reform Proposals

CIRM directors listen to a presentation on the Little Hoover Commission report. From left to right, CIRM Chairman Robert Klein, Vice Chairman Art Torres and Jeff Sheehy. Torres is chairman of the Legislative Subcommittee.

SAN FRANCISCO – A key group of directors of the $3 billion California stem cell agency today rejected proposals that would cut their board in half and substantially reduce the power of its chairman.

The directors' Legislative Subcommittee formally opposed, on an 8-0 vote with one abstention, the reform proposals made by the state's Little Hoover Commission last month. The action came after CIRM Chairman Robert Klein, a real estate investment banker, warned that “the entire thing (CIRM) could be swept away.” He declared that “certain things should not be on the table.”

The subcommittee took up only five of 14 proposals by the Hoover Commission, the state's good government agency. Following months of study, the bipartisan panel said the current CIRM structure is "is not adequate to protect taxpayers’ interests or serve its own ambitious goals."

The other nine proposals are scheduled to be discussed by the Legislative Subcommittee sometime during the next month. Today's action and any later action will go before the entire board at its meeting Aug. 19-20. Ultimately, however, it is up to the legislature to decide whether to act on the recommendations, although CIRM could make some modest changes on its own.

In addition to proposals to reduce the board from 29 to 15 members and eliminate the dual CEO problem, the other recommendations rejected today call for permitting the board to select its own chairman instead of selecting from outside nominees, reducing the length of board members to four years and directing the governor to appoint 11 of the 15 members, four of whom would have to be public members. The board currently has no public members.

The Legislative Subcommittee's action today was largely based on Klein's arguments and earlier ones by CIRM's outside counsel James Harrison of Remcho, Johansen & Purcell of San Leandro, Ca. He contended that the legislature could not make the five changes and that the proposals would have to go a vote of the people. Harrison reasoned that the legislature could not enact the changes, even with a 70 percent vote and the signature of the governor, because they would not “enhance” the purposes of Prop. 71, which created the stem cell agency. The enhancement requirement is contained in the 10,000-word ballot initiative.

CIRM Director Jeff Sheehy, a communications manager at UC San Francisco, told directors that the Hoover report provided an opening to discuss what might be needed to create an “an organization that has long-term stability.” He said he hoped for “an agency that will outlast us all,” noting that conditions have changed since 2004 when Prop. 71 was approved.

Sheehy, who abstained from the motion by Klein to reject the five Hoover proposals, challenged Harrison on the question of what changes might be considered an enhancement to Prop. 71. He questioned Harrison's opinion that removing the 50 person cap on staff could be done by the legislature while the other changes could not.

Sheehy asked Harrison whether the courts would be likely to consider the five changes an “enhancement” if the CIRM board were to endorse them. Harrison did not answer the question directly.

Sheehy's arguments found little support among the other directors. Their positions may have been best summarized by Vice Chairman Duane Roth, who said the current structure “may not be optimal but is workable.”

Our comment: Klein had the directors in a box. By ordering up the June 23 opinion from the board's counsel, he effectively limited the board's possible action. To do anything other than what they did today would have meant rejecting the advice of their $592,000-a-year outside lawyer, a man who helped Klein write Prop. 71. And it would have been a rebuff to Klein and his strongly held position that the survival of CIRM is at stake.

In going along with Klein, the board, however, indirectly lent support to a finding by the Little Hoover Commission that CIRM is, in many ways, “personality driven.” The commission declared:

“An agency governance structure that features key positions built around
specific individuals does not serve the best interests of the mission of the
agency or the state of California, however well-qualified the individuals
may be.”