CalPERS Releases Corporate Governance Focus For 2003

The Stamford, Connecticut based company will now be the primary focus of CalPERS’ corporate governance activism in the upcoming proxy season.   In a letter to the Xerox chairman and CEO, the nation’s largest public pension fund requested the company take immediate steps to add more board members and separate the top two positions.  

“It is time for Xerox to bring in new blood,” said Sean Harrigan, President of CalPERS Board in a news release.   “It’s disconcerting that the same members that oversaw Xerox during its worst period are still there…these steps are overdue and critical for restoring investor confidence and improving corporate governance.”

However, Xerox was not alone on this year’s list.   Selecting from a $131 billion pool of investments in more than 1,800 US companies, CalPERS based its decisions on stock performance, corporate governance practices and an analysis of a company’s economic value-added (EVA) evaluation, net operating profit after tax, minus its cost of capital.

When it was all said and done, CalPERS drew the cross-hairs on six companies it will target:

• Gemstar-TV Guide International Inc
• JDS Uniphase Corp
• Manugistics Group, Inc
• Midway Games Inc
• Parametric Technology

Additionally, the pension fund said it would be monitoring seven additional companies, and it may disclose possible action against them during the year.

Other Offenders

Other problem companies under CalPERS microscope, and what actions the pension fund is requesting, include:

• Gemstar: CalPERS wants the company to commit to a majority of independent directors on its board, audit, compensation, and nominating committees and to seek shareowner approval for an executive compensation policy that considers performance-based stock options.
• JDS Uniphase:   CalPERS wants JDS to eliminate its co-chairman structure in favor of a separate chairman and CEO, declassify the board, and seek shareholder approval for the company’s poison pill.
• Parametric Technology: CalPERS is concerned that each board member was paid 100,000 options or more “in recognition of extensive work during fiscal year 2001”, at a time when Parametric’s stock declined 41%.   Parametric has a six member classified board and no Nominating Committee exists.
• Midway : CalPERS wants Midway to add two new independent directors in the next year and separate the positions of its chair and CEO.
• Manugistics Group: CalPERS wants Manugistics to separate the positions of its chair and CEO

Investor Action

The action by the pension fund also 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 ).

For more information on CalPERS Focus List, visit  www.calpers-governance.org .