California pension fund makes move that is likely to increase its influence over corporations

Calif. pension fund seeks to boost its influence

SACRAMENTO, Calif. — The board of California’s giant public pension fund voted Monday to remove the limit on the number of shareholder proposals it can issue to companies in its portfolio.

Lifting the number of proposals its board can file each year means the fund’s influence is likely to grow among publicly traded companies.

The California Public Employees Retirement System, which holds about $200 billion in investments, is the nation’s largest public pension fund.

In the past, its board has pressured companies to make changes to executive compensation and to increase what it considers to be socially responsible investing.

Those challenges have resulted in corporate governance changes at companies such as The Walt Disney Co., where pressure from CalPERS helped lead to the ouster of former chief executive Michael Eisner.

Shareholder proposals usually specify a policy change that CalPERS would like a company to make. For example, CalPERS intervened last year when Eli Lilly & Co. would not allow its shareholders to call a meeting of its board of directors. The company later agreed to seek approval to eliminate its classified board structure.

Until Monday’s vote, the CalPERS board was limited each year to 20 proposals related to executive compensation and 10 related to corporate governance.

The change, which takes effect immediately, allows CalPERS to submit “as many proposals as necessary to carry out CalPERS shareowner activities consistent with its fiduciary duty,” Ann Simpson, senior portfolio manager, said in a statement.

The previous policy was put in place when CalPERS was criticized for taking a shotgun approach in trying to influence change on corporate boards, said Brad Pacheco, a spokesman for the pension fund.

The 13-member CalPERS board includes four state office holders, including Treasurer Bill Lockyer and Controller John Chiang.

In a related move, the board voted to ask 58 of the largest companies in its portfolio to adopt what is referred to as majority voting when selecting directors. Under current rules, a director can be elected by a single shareholder’s vote if he or she is running uncontested for the post.

Moving to majority voting would enable shareholders to exert more influence on a company’s leadership because more votes would be needed to win a seat.

“Majority voting is really about accountability,” Pacheco said. “It gives the ability to shareholders to voice their opinion if they don’t feel a director is performing.”

Apple Inc., Comcast Corp. and Google Inc. are among the companies targeted by the move.

“This is not a shotgun approach,” said Simpson, who leads the CalPERS Corporate Governance Program. “We expect a positive response from companies.”