Administration September 6, 2006

CalPERS Issues Request to Companies Concerning Stock Options

June 9, 2006 (PLANSPONSOR.com) - The California Public Employees Retirement System (CalPERS) has sent a letter to 25 companies asking them to respond to questions about media allegations of stock option backdating practices.
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According to a press release, CalPERS asked the companies to independently investigate media reports of employee stock option backdating and disclose all findings publicly. Additionally, the letter requests development and public disclosure in financial and proxy statements of any new Board of Directors’ policies for determining option grant dates.

Other requests in CalPERS’ letter included asking the companies to adopt strong audit policies with board-approved directives on executive compensation, to refrain from using company resources to cover any tax or legal liability for executives implicated for wrongdoing in options backdating, to commit to having shareowners annually ratify external auditors, and to take steps to make sure that board, committee, and individual director evaluations include “substantial and meaningful oversight by individual directors and the Board of Directors as a whole,” the release said.

The 25 companies were:

  • Affiliated Computer Services,
  • Altera Corp.,
  • American Tower Corp.,
  • Analog Devices,
  • Brooks Automation,
  • Caremark,
  • Comverse Technology,
  • F5 Networks Inc.,
  • Jabil Circuit Inc.,
  • KLA-Tencor Corp.,
  • Maxim Integrated Products,
  • McAfee Inc.,
  • Meade Instruments,
  • Medarex Inc.,
  • Nvidia Corp.,
  • Openwave Systems,
  • Power Integrations Inc.,
  • RSA Security,
  • Safenet Inc.,
  • Semtech Corp.,
  • Sepracor Inc.,
  • Sycamore Networks,
  • Trident Microsystems,
  • UnitedHealth Group, and
  • Vitesse Semiconductor.

“Stock option backdating potentially threatens the credibility, governance and performance of companies,” said Russell Read, CalPERS Chief Investment Officer, in the release. “We hope the SEC will continue to investigate because it imperils the creation and sustainability of long-term value for shareowners.”

The probe by the Justice Department, Securities and Exchange Commission and Internal Revenue Service into firms illegally awarding stock options to executives at artificially low prices is the biggest corporate wrongdoing investigation since the probe into illegal/abusive mutual fund trading (See Stock Option Probe Biggest Since Abusive Fund Trading Cases ).

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