Pension fund giant CalPERS on Wednesday named some of the biggest names in technology--including Gateway Inc., Lucent Technologies Inc. and Qwest Communications International Inc.--to its annual list of America's worst-run companies.
The California Public Employees' Retirement System, which in the last decade has taken on a role of watchdog on corporate governance issues, also put communications services firm NTL Inc. and insurer Cincinnati Financial Corp. on its list of companies it says have lagged competitors, punished investors with poor returns or have boards that have failed to provide independent oversight.
The $150-billion fund said it is monitoring four other companies for possible placement on the list. CalPERS seeks specific changes in governance practices from the firms it targets on each year's list.
"This list is obviously by no means exhaustive," said William Crist, president of CalPERS' board. "These same problems are inherent in the structures of many corporations in America."
CalPERS said the target companies were selected from the fund's investments in more than 1,800 firms based on stock performance, governance practices and an analysis of how much "economic value" the companies were generating.
"Economic value-added" is a company's after-tax net operating profit minus its cost of capital. By using this measure of corporate wealth creation in conjunction with relative stock performance, CalPERS said, it is able to pinpoint firms whose poor market performance is due to company-specific problems, not industry woes.
Personal computer maker Gateway made the list because it under-performed all computer sector stock indexes and its direct competitors last year, CalPERS said.
The pension fund also cited recent reports that Joseph Nacchio, chief executive of voice and data services company Qwest, had received a $1.5-million bonus last year and a $24-million cash payout during a time when the company was struggling amid a sharp downturn in the telecom industry.
Lucent, the largest telecom equipment maker, caught CalPERS' attention by refusing to adopt a proposal to elect directors individually rather than as a slate.
The fund also criticized Cincinnati Financial for not having a majority of independent directors.
In a statement, Cincinnati Financial said that it considered 10 of its 15 directors to be independent .
A spokesman for Qwest declined to comment. Representatives of the other companies could not be reached for comment.