CalPERS keeps up pressure for governance reforms at Nabors Industries

Giant fund marshals support for severance proposal

The $265.9bn (€206.7bn) California Public Employees Retirement System (CalPERS) is keeping up its pressure for corporate governance change at oil drilling firm Nabors Industries.

CalPERS, the largest US pension fund, has written to fellow shareholders in the Bermuda-incorporated, NYSE-listed company seeking support for its proposal on severance benefits.

It requires the company to seek shareholders’ approval for future severance agreements providing more than 2.99 times an executive’s base salary and bonus. It will be voted on at the company’s annual meeting in Hamilton, Bermuda on June 4.

A similar proposal by CalPERS last year gained 66% support in the wake of a $100m severance award to former CEO Gene Isenberg.

“As a long-term shareowner in Nabors we have significant concerns with the pay for performance disconnect at the company,” writes CalPERS’ Director of Corporate Governance Anne Simpson. The fund holds just under 1m Nabors shares.

She points out that Nabors’ advisory vote on executive compensation has failed to receive majority support over the past two years – in 2011 the proposal got approval from 45% of the voting shares and only 25% in 2012.

CalPERS would also be voting in favour of shareholder proposals on independent board chairman and proxy access (the right of shareholders to nominate directors), Simpson said. They have been proposed by the American Federation of State, County and Municipal Employees Pension Plan and the New York City pension funds respectively.A similar proxy access resolution last year had 56% support.

Nabors is also facing shareholder proposals on specific metrics in equity compensation (Marco Consulting Group Trust) and equity retention (Trowel Trades S&P 500 Index Fund). The company is advising shareholders to vote against all of them.

CalPERS has also released its voting at insurance giant Aetna, which holds its AGM today (May 17). It backed a proposal by the New York City funds calling for an independent chairman and a call for board oversight of political spending from the Unitarian Universalist Association of Congregations.

Union-linked CtW Investment Group had written to the company last month saying there are “significant inaccuracies” in the company’s political contributions disclosures.

At broking firm Charles Schwab yesterday, CalPERS voted against executive pay, saying it has “concerns the company has not linked pay with performance”. It also supported the New York City funds’ proposal on
political spending and Norges Bank’s proxy access proposal.

The latter two proposals were also supported by fellow funds such as CalSTRS and Dutch-based PGGM.

On Norges’ proposal, PGGM said, “proxy access will further enhance shareholder rights while providing necessary safeguards to the nomination process”.