CalPERS Rethinking Proxy Voting Campaign

June 28, 2004 ( - The California Public Employees' Retirement System's (CalPERS) policy of automatically withholding board of director proxy votes when corporate auditors perform nonaudit work is being revisited.

Sean Harrigan, president of the nation’s largest public pension fund, told the Wall Street Journal that the $165.8 billion fund is going to “revisit the policy.”   The review will come, Harrigan said, because the pension fund did not realize that so many of its votes would be affected by the policy when its board unanimously approved the standard late last year.

In all, CalPERS withheld support for the re-election of directors on the boards of about 90% of the 2,700 companies in its U.S. portfolio. Many of those “withhold” votes were tied to the policy on auditors.

Harrigan is not alone in his public questioning of the fund’s policies.   In May, California Controller Steve Westlyquestioned whether the two-year proxy voting policy might not be achieving its stated goals of improving auditor independence (See  Westly Questions CalPERS, CalSTRS Proxy Voting ).

“It’s time to ask: are our policies working? Are companies changing their practices? If they are, we need to press forward. If the answer is no, let’s find out why,” Westly said in a letters sent to board members of CalPERS and the California State Teachers Retirement System (CalSTRS).

Harrigan echoed earlier sentiments expressed by Westly wondering if the two pension funds are in fact withholding votes for board members that represent the values CalPERS and CalSTRS wants from their investments.   “I’m concerned that we are voting against some of the nation’s strongest voices for good corporate governance, including Warren Buffett. These are the very people we should be encouraging to serve on corporate boards,” Westly said.