CORPORATIONS UNDER PRESSURE : CalPERS Raps Big Business for Neglecting Shareholders : Investing: California’s public employee pension fund steps up pressure for corporate reform.
Some of the biggest names in U.S. business--including Time Warner Inc., Polaroid Corp. and USAir Inc.--were publicly accused Friday of neglecting shareholder interests by the nation’s largest public employee pension fund.
The announcement by the activist California Public Employees’ Retirement System was intended to intensify the pressure on many of the 12 big companies it has negotiated with privately since last fall to adopt corporate reforms. The fund, known as CalPERS, said it would support efforts to oust the directors of companies that fail to take corrective steps.
CalPERS cited companies it has invested in whose stocks performed poorly over the past five years. It said all of the dozen targeted companies have also been guilty of such things as paying executives excessively or failing to maintain independent boards of directors.
The fund said it decided to go public with its list after its private efforts yielded “mixed” results.
“It’s no wonder these companies are such poor performers, given some of their attitudes toward shareholders,” Dale M. Hanson, chief executive of CalPERS, said in a news release. Three of the companies refused to meet directly with CalPERS, fund officials said.
CalPERS, which invests $68 billion in pension funds for nearly 1 million public employees in California, has for several years been a powerful advocate for shareholder rights. Last fall, it departed from its usual practice of seeking reforms through shareholder resolutions and instead began exerting private pressure on its corporate targets.
On Friday, however, it abandoned that approach. “Clearly, CalPERS is trying to turn the heat up on these companies to take some concrete actions before their annual meetings,” said Ralph V. Whitworth, president of United Shareholders Assn., a Washington-based nonprofit advocacy group that has worked with CalPERS.
“Not much has happened other than talk,” Whitworth added.
Still, CalPERS said that two of the 12 companies have satisfied its concerns with recently announced reforms. The fund noted that ITT Corp. is overhauling its executive compensation system to link it more closely to the company’s performance.
The other company that has reached an agreement with CalPERS is Ryder System Inc. CalPERS credited Ryder with, among other things, requiring its board to have a majority of outside directors.
In addition, two big companies faulted for their executive compensation--IBM Corp. and American Express Co.--have recently disclosed major pay cuts for their chief executives that could resolve CalPERS’ objections.
But CalPERS criticized Phoenix-based Dial Corp. for its executive pay and complained that the company’s management has declined to meet directly with the fund. Dial’s chairman, John W. Teets, replied that he has invited CalPERS officials to attend the company’s meetings with stock analysts next month.
Teets also said that the company relies on outside directors and consultants to determine executive pay, and noted that its stock has nearly doubled since January, 1991. “I don’t know what they want us to do. We’re doing everything we can,” said Teets, who earned $2.1 million in cash compensation in 1991.
CalPERS urged the formation of shareholder advisory committees for Polaroid and Control Data Corp., both of which it says have refused to meet with the fund. Polaroid declined to comment. Control Data said the company is already meeting regularly with shareholders and that it doesn’t believe that CalPERS officials “understand” the ongoing overhaul of the company.
The fund has urged Time Warner to establish a more independent board, and will meet with USAir to push the airline to establish a shareholder advisory committee. The three other companies targeted by CalPERS are Chrysler Corp., Hercules Inc. and Salomon Inc., all of which are negotiating with the fund.
