AIG tops the list following allegations of widespread accounting fraud and other corruption that cost CalPERS more than $240 million in losses, the giant pension fund announced Wednesday .
Also on the list are AT&T of Bedminster, New Jersey; Delphi in Troy, Michigan; Novell in Waltham, Massachusetts; and Weyerhaeuser in Federal Way, Washington.
“These five companies are now on our radar screen for their poor corporate governance and in many cases poor performance that has economically damaged shareowners,” said Rob Feckner, President of the CalPERS Board. “We will press for needed reforms to restore long-term profitability and investor confidence.”
CalPERS’ Focus List is selected from the pension fund’s investments in more than 1,800 US corporations, and is based on the companies’ long-term stock performance, corporate governance practices, and an economic value-added (EVA) evaluation, according to the news release.
AIG made CalPERS’ list after its stock dropped more than 21% in the one year period ended March 31, 2005, and investigations began into accounting misstatements, bid-rigging and the use of questionable insurance products.
“Potential fraud and corruption at AIG have cost working families millions of dollars and threatened the security of their pensions,” said Charles Valdes, CalPERS Investment Committee Chair. “We are going to do everything in our power to seek corporate governance improvements to prevent further economic damage. A good start for AIG would be to strengthen the independence of its board.”
AT&T is on CalPERS’ list despite SBC’s acquisition announcement to acquire the company earlier this year. The pension fund believes the company and its directors warrant greater attention after change in control agreements were approved that could pay out $41 million in cash to executives and additional millions on the immediate vesting of stock options and restricted stock.
Delphi and Weyerhaeuser made the list because of their poor response to multiple shareowner proposals that have been approved by shareowners but not implemented by their Boards.
CalPERS also put Delphi on the list because the company overstated cash flow from operations by $200 million in 2000 and pretax-income by $61 million in 2001, significant executive turnover, and is the focus of investigations by the Securities and Exchange Commission and FBI.
Proposals to declassify the Delphi Board and change to annual director elections have passed for the last four years, and proposals to redeem the Company’s poison pill have passed for the last five years.