CalSTRS Pressures Firms on Exec. Pay

May 5, 2009 ( - The California State Teachers' Retirement System (CalSTRS), the second largest public pension fund in the U.S., has kicked off a public awareness campaign aimed at pressuring companies to put in place "more responsible" policies to compensate their executives.

A CalSTRS news release said it was calling on 300 of companies in its portfolio to develop comprehensive executive compensation policies and to allow shareholders advisory votes on those policies. “The goal is to reward long-term thinking and improve pay-for-performance practices while deterring excessive risk taking,” the fund said in the announcement.

This initiative includes the publication of executive compensation model policy guidelines, communication with targeted companies that stresses using those guidelines, and related princples.

“CalSTRS has a long history of promoting responsible compensation policies that link pay to performance and align shareholder and management interests,” said Anne Sheehan, CalSTRS director of corporate governance, in the announcement. “We see our efforts as key to improving long-term returns and meeting our fiduciary duty to California’s teachers and their families.”

The CalSTRS principles offer companies a five-part approach that calls for:

  • A clear overarching philosophy that aligns the interests of shareholders and management;
  • A well designed, comprehensive compensation policy that takes a detailed look at all of its components;
  • Transparency through a plain-English description of a well-crafted compensation plan;
  • Accountability through a responsible compensation committee; and
  • A compensation committee comprised of independent directors using only independent advisers and consultants.

CalSTRS said it will follow up with targeted companies through stepped-up communications, emphasizing use of the guidelines and, if necessary, withholding proxy votes on directors and compensation plans.

More information about CalSTRS compensation principles are available here .

More information about CalSTRS compensation guidelines are available here .