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.

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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='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Abu Dhabi SWF Becomes Less Distant

The traditionally clandestine fund, which has rarely revealed any details of its investment strategy or investments, becomes more open.

The Abu Dhabi Investment Authority (ADIA), the world’s largest sovereign wealth fund, released its first yearly statement Monday, marking an out-of-character effort to increase transparency.

The decision to release financial statements follows an October 2008 agreement among the world’s SWFs to promote openness by pools of government-held wealth, in which an International Working Group of Sovereign Wealth Funds (IWG) was created to reflect the funds’ investment practices and objectives.

Despite ADIA’s greater openness, it declined to expose its total assets under management, which remains hazy with some estimates reporting a total of less than $400 billion and other figures surpassing $875 billion. 

The SWF’s “annual review” provides a glimpse into the fund’s operations and investment strategy. And its new Web site seeks to make the fund more accessible. Its report provides a breakdown of its portfolio by asset class and region, a description of its approach to investing and risk management, an outline of how ADIA is structured, and overviews of both its governance practices and relationship with the Government of Abu Dhabi, according to a news release on the fund’s Web site. 

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 “For more than 30 years, ADIA has been successful in building strong and trusted relationships with governments, regulators and business partners around the world,” said Sheikh Ahmed bin Zayed Al Nahyan, managing director of ADIA, in the statement. “The publication of ADIA’s first annual review and launch of our new website represent another important milestone in this ongoing process.”

The report shows a majority of the fund’s holdings are focused on conventional investments, such as North American and European stocks and bonds. Between 35% and 50% of ADIA’s investment are in North America, and an additional 35% are based in Europe, the report showed. The report also revealed that as much as 45% of its assets are invested in the developed world. 

According to ADIA, the fund gained 6.5% annually during the past two decades, despite losses from a $7.5 billion investment in Citigroup and other investments. The fund gained 8% annually over the last 30 years through the end of 2009. The fund, established in 1976, owns assets ranging from Citigroup bonds and a stake in Gatwick airport to residential property in cities worldwide. 

Looking ahead to 2010, the fund reported that it continues to face “considerable uncertainty” amid a turbulent global economy. “Indeed, the timing and nature of exit strategies, will probably dominate the economic debate and outlook for quite some time… considerable uncertainty remains about the outlook for 2010,” said Nahyan in the review.



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

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