Change, but Not a Coup
Corporate America cheered when union activist Sean Harrigan, a thorn in many an executive’s side, was removed this week as president of the board of California’s $177-billion state employee retirement system. Consumer activists and union leaders darkly saw the hand of Gov. Arnold Schwarzenegger’s big-business buddies and predicted a retreat from the corporate reform activism that Harrigan pushed at CalPERS.
The truth, as usual, is more complicated. Harrigan did not invent corporate oversight at CalPERS, which because of the size of its stock holdings has undeniable influence in corporate boardrooms. He did push it into new territory, for good and ill. CalPERS’ part in a stockholder uprising at Walt Disney Co. helped knock CEO Michael Eisner off his imperious perch as chairman and brought healthy attention to out-of-whack executive pay. But an inflexible new rule about what corporate auditors should and shouldn’t do led to votes against such corporate good citizens as Warren Buffett (a Coca-Cola board member). That one had CalPERS’ own board members cringing. Harrigan’s attacks on the chairman of Safeway Corp. during the recent months-long grocery strike drew special corporate wrath.
So Harrigan obviously got a few steps ahead of other pension-plan reformers, even though his stewardship of the fund’s assets was not questioned. As an appointed board member, he was always vulnerable to the wishes of the state personnel board, which he represented on the 13-member CalPERS board. But it would be a mistake to consider his ouster the beginning of significant retreat from oversight of the business world.
As a large shareholder in many corporations, CalPERS has an obligation to manage its investments in the best interest of its pensioners. In recent post-Enron years, many large pension funds broadened the definition of interest to push for more active corporate oversight and transparency. Because reformers retain a majority on the CalPERS board, no significant policy shift is expected. CalPERS may, however, be more selective and specific in seeking corporate reform. Under Harrigan, its clout was diluted by scattershot pursuits.
It is hard to say with certainty what role Schwarzenegger, being cozy with the California Chamber of Commerce and Republican Party, played in the personnel board’s 3-2 vote to remove Harrigan. The governor does name the personnel board members, but Schwarzenegger so far has appointed just one. The swing vote to remove Harrigan and replace him as a CalPERS board member with veteran personnel board member Ronald Alvarado of Sacramento was cast by a fellow Democrat. Alvarado, according to a colleague, wanted to wind up his 10-year term with a year on the CalPERS board after supporting Harrigan for five years.
CalPERS Vice President Rob Feckner, also a labor official (in the Napa school district), will be interim president until an election in February, in which he’s likely to run. Former Assembly Speaker and San Francisco Mayor Willie L. Brown Jr., who lost a close fight with Harrigan in 2003 and remains a member of the CalPERS board until 2007, may try again.
If Harrigan caused the business world indigestion, what does the prospect of Willie Brown as CalPERS chief do?
