CalPERS Proposes To Amend Global Principles


Next Monday, the Investment Committee of CalPERS’ Board of Administration is scheduled to consider several amendments to CalPERS’ Global Principles of Accountable Corporate Governance.  Among other changes, the committee will consider adding the following principle with respect to board tenure:

Boards should consider all relevant facts and circumstances to determine whether a director should be considered independent.  These considerations include the director’s years of service on the board.  Extended periods of service may adversely impact a director’s ability to bring an objective perspective to the boardroom.  Additionally, there should be routine discussions surrounding director refreshment to ensure boards maintain the necessary mix of skills and experience to meet strategic objectives.  Board’s should also develop and disclose a policy on director tenure.

The Investment Committee is also considering adding the following directive concerning corporate board member responsibilities:

The Board should be responsible for reviewing, approving and guiding management’s development of corporate strategy, capital discipline and allocation, major plans of action, risk policies, business plans, setting performance objectives, monitoring implementation and corporate performance, overseeing major capital expenditures, and acquisitions/divestitures.

This is far too many words to say not very much.  In general, corporate law already provides that the board of directors manage the business and affairs of the corporation.  See, e.g., Cal. Corp. Code § 300(a).

The Investment Committee is also considering the following changes to CalPERS’ equity compensation principles:

  1. Requiring companies to make full disclosure of any pledging policies;
  2. Prohibiting the pledging or encumbering of stock subject to executive ownership requirements;
  3. Prohibiting the use of derivatives or hedging of director or executive stock ownership; and
  4. Requiring full disclosure of hedging policies.

I was also not all surprised to see that CalPERS wants to add the so-called “universal proxy” to its principles:

To facilitate the shareowner voting process in contested elections opposing sides engaged in the contest should utilize a proxy card naming all management nominees and all dissident nominees, providing each nominee equal prominence on the proxy card.

See Just Who Is Behind The Universal Proxy?



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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