CalPERS Board Removes Shareholder Proposal Limit

The largest US pension fund voted to lift the limit on the number of shareholder proposals its staff can issue and announced plans to increase the accountability of directors through a majority vote policy.

(March 16, 2010) – The board of the California Public Employees’ Retirement System (CalPERS), the nation’s biggest state-run pension fund, voted Monday to remove the limit on the number of shareholder proposals its staff can issue to companies in its portfolio.


CalPERS’ shareholder proposals often detail a certain course of policy-related action that it would like a company to take. Until the vote earlier this week, the fund’s old limit was up to 10 proposals a year for governance issues, and up to 20 proposals a year for issues related to executive compensation. CalPERS will now be allowed to submit as many proposals as it deems necessary.


The 13-member CalPERS board also voted to ask 58 of its largest US companies in its global equity portfolio, including Apple, Google, and Coca-Cola, to voluntarily adopt a new majority vote standard when selecting directors, according to a news release published on the fund’s Web site. The new approach would permit shareholders to block uncontested candidates from being elected to company boards, Reuters reported.


CalPERS’ actions reflects an increase in the accountability of directors and the pension fund’s likely greater influence among publicly traded companies. Its attempts to push for reform shows the fund’s reputation of leveraging its investing power to urge changes in corporate governance.


“The majority vote standard is an effective tool to hold directors accountable for creating shareowner value and encouraging better shareowner-director communication,” said CalPERS Board President Rob Feckner in a statement. “Many companies have already adopted this rule on their own, and we hope that others will do so in the coming weeks.” The new rules would grant shareholders greater power over the direction of the company, as more votes would be required to win a seat.


Anne Simpson, who leads the CalPERS Corporate Governance Program, said that CalPERS expects a positive response from companies, and she anticipated that board members will welcome the positive mandate that majority voting brings. “This is not a shot gun approach,” she said. “Too often, board appointments look more like a coronation than election. This sets the stage for accountability, which is critical for all sides.”


In related news, the Sacramento-based fund appointed George Diehr as chairman of its investment committee, Reuters reported. In February, he was re-elected as vice president of the fund. The CalPERS committee also approved Rogerscasey Inc and Wilshire Associates as finalists in the system’s search for a general investment consultant, supporting a plan to increase the surveillance and scrutiny of middlemen.


CalPERS has about $205 billion in assets under management and administers retirement benefits for more than 1.6 million active and retired State, public school, and local public agency employees and their families.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742