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CalPERS to Create Standards

Pensions: System's governance plan is aimed at evaluating, grading nation's 300 largest firms.

September 20, 1996|From Dow Jones News Service

NEW YORK — The $100-billion California Public Employees' Retirement System Board is developing "model U.S. corporate board" governance standards to evaluate and grade the nation's 300 largest companies.

The plan is part of CalPERS' corporate governance program for 1997, which was approved by the board of the nation's largest public pension fund earlier this week and announced late Wednesday night.

The system's efforts, among those of other more activist shareholders, have forced corporations ranging from General Motors Corp. and International Business Machines Corp. to Charming Shoppes Inc. and Venture Stores Inc., to take notice of shareholder concerns over the past 11 years.

This year's program is the first crafted under the leadership of Kayla Gillan, the system's new general counsel. Gillan takes over from Richard Koppes, the system's highly visible representative in corporate governance who left the system in July after 10 years. Gillan was previously deputy general counsel, working under Koppes, for six years.

CalPERS won't name the companies it plans to target until January or February. Typically, this gives the system time to work with companies before making its efforts public. Last year, CalPERS focused on small and medium-sized companies, and, according to a recent interview with Gillan, achieved good results, particularly with Charming Shoppes and Venture Stores. The system continues to be disappointed with Rollins Environmental Services Inc., a Wilmington, Del., firm. CalPERS wants the company to have a majority of independent directors on its board.

This year, the system plans to again target small and medium-sized companies. To be a target, a company must rank among the poorest long-term relative performers as compared to industry peers, based on stock price. These companies also must be included in CalPERS' domestic stock portfolio, which has more than 1,500 companies.

The system's strategy is to meet with each company's independent directors to discuss performance and shareholder value. If the companies don't cooperate, CalPERS may take more aggressive steps, like filing shareholder proposals or voting against a management slate of directors.

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