CalPERS calls for support on US director nominations

US superfund has Hewlett-Packard and UnitedHealth Group in its sights

CalPERS, the giant $247bn (€181bn) US pension fund for Californian public employees, is urging worldwide institutional investors to petition the US Securities and Exchange Commission (SEC) for a ruling that would enable investors to nominate directors to the boards of US companies.
Anne Stausboll, chief operating investment officer at CalPERS, told investor signatories of the UN Principles for Responsible Investment at a conference in Geneva last week that US pension funds needed support from foreign shareholders in US companies on director resolutions at annual general meetings. US investors have no power to nominate directors to company boards, unlike investors in UK companies.
Stausboll said investor pressure needed to be applied to the SEC, which was debating the issue ahead of an expected ruling before the shareholder proxy-voting season in spring 2008. The US Congress recently held a hearing on the subject.
Earlier this year, CalPERS teamed up with CalSTRS, the Californian pension fund for teachers, to solicit support for a binding shareholder resolution to nominate director candidates at Hewlett-Packard. The proposal received support from 39% of shareowners casting votes. At the time of the vote, CalPERS said:“Allowing shareholders a limited right to nominate directors is particularly appropriate at Hewlett-Packard given the dysfunctional board, as manifested in the board leaks, the related investigation and its fallout.”
CalPERS also sponsored a non-binding shareowner resolution seeking to nominate directors at UnitedHealth Group, in which the fund owns 6.4 million shares. The proposal received support from 42% of shareholders casting votes. UnitedHealth is the subject of a Calpers-led class action lawsuit over a stock options scandal.
CalPERS said lobbying for shareholder access to a company’s proxy materials in order to nominate candidates for board election was the most effective mechanism to protect shareholder democracy and ensure director accountability and long-term value creation.
The fund’s proposal for what it calls “responsible shareowner access” is that investors should hold a minimum 3% of company equity for more than two years before being able to file a director nomination resolution. It said shareholders could then nominate up to two candidates for election, subject to approval by a majority of shareholders. Russell Read, chief investment officer at CalPERS said: “The votes at these companies are too large and the message is too loud for companies and regulators to ignore.”