Has CALPERS Gone Too Far?

Businessweek Online is faulting CalPERS for being too agressive in their good-governance crusade.

At 2,400 companies this year, 90% of its portfolio, CalPERS is withholding support for directors — many whose sins are exceedingly small.

Most are audit committee members who let auditors consult — which can be an incentive to overlook problems. Others have attendance gaps or minor conflicts. CalPERS wants to bring such issues to the fore. Says spokeswoman Patricia K. Macht: "Our way to vote our conscience is to cast our protest vote against those directors."

If CalPERS wants the attention of wayward directors, it has it. But if it wants lasting change, targeting the worst would be better. By faulting everyone, CalPERS risks marginalizing its voice — becoming the pension fund that cried wolf.

What's more, CalPERS' approach could backfire. The Securities & Exchange Commission is considering making it easier for shareholders to nominate board candidates. Business interests are furious, saying the move would cause chaos. CalPERS' no-vote campaign confirms their worst fears and gives them a potent argument against one of the most important reforms to come along in decades. Says John J. Castellani, president of the Business Roundtable: "It's a broad-based agenda that has gone too far."

Maybe they are a bit extreme, but at least they are taking their responsibility as a shareholder seriously, which is more than I can say for most.

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