CalPERS to Withhold Votes at Citigroup, Coke

The California Public Employees’ Retirement System on Monday said it would withhold votes to reelect Citigroup Inc. Chairman Sanford I. Weill and certain directors at Coca-Cola Co. and 10 other major companies, aiming to improve corporate governance by protesting the makeup of company boards.

CalPERS, the biggest U.S. pension fund and one of the nation’s biggest shareholders, said Weill played a “significant role in several scandals” related to Wall Street’s 2003 settlement of allegations of widespread analyst conflicts of interest.

Citigroup paid $400 million as part of the brokerage industry’s total $1.4-billion deal to settle with regulators.

Sacramento-based CalPERS over the years has targeted dozens of companies in efforts to press for better governance and more shareholder input. But its vote-withholding decisions this year may indicate a ratcheting up of pressure on corporate America, some experts said.

“CalPERS is increasingly becoming more bold in its positioning, particularly in regard to governance issues,” said C. Warren Neel, director of the University of Tennessee Corporate Governance Center.

In addition to withholding votes for Weill, the fund said it would withhold votes for Citigroup Chief Executive Charles Prince because of his business ties to the firm, which could hamper his objectivity, CalPERS said. Votes for six other Citigroup directors also would be withheld, it said.

At Coke, CalPERS said it wouldn’t vote for nine of the firm’s 16 directors, including billionaire Warren E. Buffett.

Institutional Shareholder Services, which advises big investors on proxy votes, last week said it opposed Buffett’s reelection because he was on Coke’s audit committee. Several subsidiaries of Buffett’s holding company, Berkshire Hathaway Inc., have business ties to Coke and could create conflicts of interest for Buffett on the audit committee, ISS said.

Coca-Cola defended its directors.

“These directors are talented and respected executives and also substantial shareowners in our company,” said Coke spokesman Ben Deutsch. “Given their significant ownership in our company, there are few people more closely aligned with the interests of our shareowners.”

Citigroup said CalPERS’ decision with regard to its directors was “unwarranted.” In a statement, the firm said it “adheres to the highest standards of corporate governance, business practices and accuracy and transparency in its accounting and financial disclosure.”

Other companies at which CalPERS said it planned to withhold votes for certain directors were: Burlington Resources Inc., Charter One Financial Inc., Mellon Financial Corp., Southtrust Corp., Sprint Corp., State Street Corp., Stryker Corp., Wachovia Corp. and Washington Mutual Inc.

In addition, CalPERS said it would withhold votes from all incumbent members of the board at PG&E; Corp., the owner of Pacific Gas & Electric. The fund said directors failed to implement shareholder-approved proposals to eliminate takeover defenses, known as poison pills, and declined to account for employee stock-option grants as expenses.

“Every shareholder is entitled to their vote,” PG&E; spokesman Brian Hertzog said in response to the CalPERS announcement. A shareholder proposal last year to expense stock options for executives and other employees was defeated after receiving 49% of the vote, he said.

Last week, CalPERS said it supported a coalition seeking to oust Safeway Inc. Chairman Steven Burd.