CalPERS clear the decks for increased activism

The California Public Employees Retirement System (CalPERS) has signalled a move into more direct activism after a vote this week (Monday) to remove a cap on the number of shareholder proposals it can issue.

Until now, the $200 billion fund was limited was limited to 20 proposals related to executive compensation and 10 related to corporate governance each year. 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,” Anne Simpson, senior portfolio manager, said in a statement.

The cap was was put in place when CalPERS was criticized for taking a “shotgun approach” in trying to influence change on corporate boards. “This is not a shotgun approach,” said Simpson, who leads the CalPERS Corporate Governance Program. “We expect a positive response from companies.”

Majority voting is also on the agenda for the fund after the board voted to ask 58 of the largest companies in its portfolio to move away from the dominant US practice of “plurality voting” where a director can be elected by a single shareholder’s vote if he or she is running uncontested for the post.

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

It’s been a busy week for CalPERS. On the fund publicly declared support for Senator Dodds attempts at governance reform. Rob Feckner, CalPERS Board President said in a statement: “This legislation is good for business, good for the nation’s economic recovery, and will go far in protecting investors and taxpayers. We are very pleased and look forward to working with Senator Dodd on the passage of this legislation.”

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