CalPERS Calls For Performance Options at GE

April 8, 2003 ( - The California Public Employees' Retirement System (CalPERS) is asking General Electric's top 500 shareholders to vote for a resolution adopting performance-based stock options.

The nation’s largest public pension fund, which owns approximately 47 million shares of GE common stock, is requesting the affirmative vote on proposal number 10, sponsored by the Amalgamated Bank Long View Collective Investment Fund and co-sponsored by CalPERS, according to a news release.

Performance-based stock options are widely defined, but include:

  • Indexed options, whose exercise is linked to an industry index
  • Premium-priced stock options, whose exercise price is above the market price on the grant date
  • Performance-vesting options, which vest when the market price of the stock exceeds a specific target.

“Performance-based options will ensure that executives get payouts for true outperformance and not simply by keeping a seat warm during a rising market.   We believe this provides greater incentive for long-term superior performance and better alignment of interests for shareowners,” said Sean Harrigan, President of CalPERS Board of Administration.

Passage of the proposal would mark another major change for GE’s compensation structure.   In February, the company announced top-level compensation would no longer take into consideration income generated by the pension plan.   The Communications Workers of America (CWA) initially proposed the measure that was adopted by the conglomerate in response to shareholder requests (See  GE Reworks Executive Compensation Structure ).

CalPERS Activism

The action by the $131 billion California pension fund touches on three of the six “Power of the Purse” principals released by California State Treasurer, and CalPERS board member, Phil Angelides (See   Angelides Posits Purse Power). 

Further, CalPERS’ actions put into practice active ownership that Angelides advocated in an exclusive interview with PLANSPONSOR :  “We, as investors, are the owners of these companies.  We have the rights to run dissident board members, replace corrupt board members…But, to make those rights real, you have to be prepared to do the real work of democracy” (See    A Call To Action).

CalPERS’ letter to GE shareowners can be found on the fund’s corporate governance Web site .