CalPERS Approves Comp Reform Program

November 15, 2004 ( - The California Public Employees' Retirement System's (CalPERS) Board of Administration on Monday okayed a new strategy to fight abusive compensation practices in corporate America.

A CalPERS release said the plan calls for CalPERS to push for executive compensation reforms on a national level by addressing issues of transparency and design with the Securities and Exchange Commission (SEC), the financial exchanges, and the compensation consulting industry.

The fund will also wage a campaign against targeted individual compensation committee directors who support “egregious” pay packages and companies that have the worst compensation practices, as well as recognize corporations who are leaders in pay for performance, according to CalPERS.

“This will be a focused approach to today’s most serious problem,” said Sean Harrigan, president of CalPERS Board, in the news release.”We will recognize the good guys who compensate for performance and we will call out some prime examples of those who are hurting long-term shareowner value by paying for lack of performance.”

Under the plan, CalPERS will pursue six major pay for performance initiatives over the next three years. They include:

  • submitting a proposal to the SEC in 2005 that calls for greater transparency of compensation packages
  • strengthening listing standards at the securities exchanges and self-regulatory organizations to promote greater communication and transparency between listed companies and investors
  • urging the compensation consulting industry to adopt practices that better aligns boards and management with shareowners
  • targeting a limited number of corporations in 10 market sectors with the worst compensation practices to move their executive compensation philosophy and practice toward greater pay-for-performance concepts
  • publicly withholding support from a focused list of certain corporate compensation committee members who develop and support egregious pay packages
  • recognizing companies and individuals who use superior pay for performance practices.

A copy of CalPERS  Executive Compensation Strategic Plan  can be found on its Web site. CalPERS has assets of approximately $168 billion and provides retirement and health benefits to more than 1.4 million state and local public employees and their families.