CalPERS Says Challenge to Boards Is Working
The $83-billion California Public Employees Retirement System said more of the companies whose stock it owns are making their boards responsive to shareholders.
In the past year, CalPERS sent letters to the 300 largest companies in the Standard & Poor’s 500 index, asking them to create written guidelines of their board practices. By requesting guidelines for actions such as choosing board members or holding meetings with only outside directors, CalPERS hopes to make corporate boards more attentive to shareholder interests and less beholden to management.
Of the 300 largest S&P; 500 companies, 53% have completed or are writing guidelines, it said.
“We are enormously pleased that more than half of the companies accepted our challenge with responses that were either good or excellent,” said William Crist, CalPERS’ board president.
Among the companies that met CalPERS’ standard were AlliedSignal Inc., Chevron Corp., Exxon Corp. and Campbell Soup Co.
Walt Disney Co., Duracell International Inc. and CBS Inc. were among the 76 companies that failed to respond to the request, the fund said. In the first round of results CalPERS published in October, 36% of the companies had written board guidelines or were doing so.
CalPERS gave a company high marks if the board reviewed its practices, publicized its guidelines to shareholders and said it believes that board practices that ensure the protection of shareholder rights are important.
A CalPERS letter to the firms said that by critically examining their structure and relationships with management and shareholders, boards can better perform their most fundamental duty: “to hire, monitor and, when necessary, fire those officers who are given the day-to-day management of the company.”
CalPERS asked these companies to follow the example set by General Motors Corp.’s board. In March, 1994, the GM board released a 28-point list of guidelines mandating certain such practices for its board of directors as having its independent directors meet alone three times a year and having the board, rather than management, nominate new members.
