CalPERS Presses for Greater Board Clout : Investing: The pension fund applauds actions at General Motors and urges other firms to do likewise.
Citing General Motors Corp. as a role model, the nation’s largest public pension fund Thursday called on 200 major corporations to significantly bolster the power of their boards of directors.
In letters to the top 200 Standard & Poor’s companies, the $80-billion California Public Employees Retirement System applauded a recently disclosed GM policy and urged other firms to take similar steps.
CalPERS, a leader in the so-called corporate governance movement, which seeks closer supervision of management in publicly held companies, owns stock in all 200 firms. It asked them to reply by Aug. 1.
Since a 1992 revolt by GM’s board that ousted top management and named an outside director as chairman, the auto maker has steadily increased the clout of its board members, once derided by ex-GM director Ross Perot as “pet rocks.”
GM’s board was thought to typify a cozy practice throughout corporate America in which board members, hand-picked by managers who spoon-fed them information, seldom acted as independent voices whose job was to protect shareholders’ long-term interests.
Today, only two of GM’s 14 board members are managers.
In March, GM formally adopted 28 principles for the board to follow in governing the company. CalPERS mailed a copy of the principles with its letter to the 200 companies.
The most significant of the changes, said CalPERS general counsel Richard Koppes, is the establishment of a “lead director” charged with conducting regularly scheduled meetings of outside, or non-management, directors.
At GM, the lead director, ex-Procter & Gamble chief John G. Smale, is chairman of GM’s board. If that changed and the chairmanship were held by the chief executive, another board member would become lead director.
GM’s policy also calls for board members to have “complete access to management” and for them to get in advance details of issues coming before the board--theoretically ending the day when board members learned only what managers wanted them to know. It also requires that a majority of the board be outsiders.
“We’re not asking these companies to do exactly what GM has done, but we want them to review it and put a comprehensive policy in writing,” Koppes said.
“A number of companies may do some of these practices, but GM’s formal adoption of these measures is unique. We think it’s excellent and will go a long way toward improving corporate governance.”
In the past, CalPERs has used publicity to prod or embarrass companies into becoming more responsive to shareholders. Koppes said that if it doesn’t get the responses it wants, “we’ll write another letter. We won’t go away.”
Among those to receive the letter from CalPERS Chief Executive Dale Hanson are California giants such as Arco, First Interstate, Occidental Petroleum, Disney, Unocal, Rockwell, Bank of America, Chevron, Pacific Telesis, Wells Fargo and Hewlett-Packard.
