5 companies on CalPERS’ worst-run list
The California Public Employees’ Retirement System singled out restaurant operator Cheesecake Factory Inc., home builder Standard-Pacific Corp. and three other companies for what the pension fund described as poor financial performance and corporate governance.
Also cited on CalPERS’ annual “Focus List” were furniture maker La-Z-Boy Inc., medical equipment company Invacare Corp. and insurance brokerage Hilb Rogal & Hobbs Co.
“These companies are the poster children for bad performance and bad corporate governance,” Eric Baggesen, CalPERS’ acting senior stock manager, said in a conference call with reporters. “Their long-term performance is at least 40% behind their peers, and they’ve resisted appeals to change their corporate practices that make their boards unresponsive to shareholder interest.”
The biggest U.S. pension fund, with $236.3 billion in assets, CalPERS is trying to eliminate the staggered election of directors at Calabasas Hills-based Cheesecake Factory and Irvine-based Standard-Pacific as well as at Hilb Rogal and La-Z-Boy.
Staggering board elections -- so that the terms of a company’s directors don’t all end at the same time -- makes it harder for shareholders to replace the board’s members.
Cheesecake Factory also should adopt a policy giving it the power to recover money paid to executives as a result of fraudulent behavior or inflated performance figures, CalPERS said.
Standard-Pacific issued a statement defending its director election process, saying the slumping housing market made it imperative that the company’s board retain experienced members.
“We listen to our shareholders and remain committed to good corporate governance,” the company said.
Representatives of Cheesecake Factory and Glen Allen, Va.-based Hilb Rogal & Hobbs didn’t return phone calls seeking comment.
La-Z-Boy, based in Monroe, Mich., disputed CalPERS’ findings, said Kathy Leibmann, the company’s director of investor relations and corporate communications.
“We take our responsibilities to shareholders seriously,” she said.
Dale LaPorte, general counsel for Elyria, Ohio-based Invacare, said the company disagreed with the pension fund’s position on board elections. In a telephone interview, he said giving all directors identical terms of office wasn’t “in the best interest of long-term shareholders.”
Since 1992, CalPERS has annually identified as many as a dozen poorly performing public companies.
Making it onto the list is generally considered to be bad for a company’s image and business, and top executives try to make quick changes to avoid being embarrassed a second time by the fund.
Santa Monica-based Wilshire Associates, a consultant to CalPERS, last year said companies on the list went on to outperform the Standard & Poor’s 500 stock index by 8.1% points over a five-year period.
