At a Glance
Good diversity efforts
"Activist investors, massive"
"Not as sharp as perceived"
For more than 75 years, CalPERS has been allowing California retirees to kick back and soak up the sun in peace, confident that their funds are in the hands of some of the shrewdest money managers in the country. As the largest public pension systems in the U.S., CalPERS (short for California Public Employeesâ€™ Retirement System) manages pension and health benefits for approximately 1.5 million California public employees, retirees and their families. These members are split nearly evenly between state employees (31 percent), school employees (37 percent) and local public agency employees (32 percent).
CalPERS has more than its fair share of cash to invest, and since 1985, CalPERSâ€™s total capital increased more than tenfold. By the end of 2008, CalPERS had $184.03 billion in its investment portfolio (which had dropped 23 percent from the amount it had in the beginning of the year).
CalPERS was founded in 1932 under California state law to provide retirement benefits for state employees. By 1939, CalPERSâ€™s
pensioners grew to include school employees. In 1962, CalPERS also began offering health benefits for state employees and for public agency and school employees since 1967. Then, in 1995, the pension system also began offering long-term care insurance on a not-for-profit basis. By 2001, CalPERS had grown so big it began developing a new 550,000-square-foot, $250 million headquarters expansion project in Sacramento.
In recent years, CalPERS has developed a nationwide reputation for shareholder activism in the name of better corporate governance, especially bloated executive compensation packages at companies in which it has invested. It has sued big-hitters like the New York Stock Exchange, which allegedly allowed floor traders to engage in investment practices that hurt investors, and banned investment of its funds in nine companies that do business in Sudan until the government of that country ends the ongoing atrocities in its northwest Darfur region.
Though itâ€™s been advocating corporate governance since 1984, CalPERS has recently emerged as a force to be reckoned with when it comes to the field of pushing businesses to hit their benchmarks. It takes its responsibilities in that department so seriously that in 2002 it formed an official Corporate Governance Investment Program (CGI), which focuses on highly concentrated portfolios and actively engages in the business practices of corporations which they feel are underperforming. This program has $5.4 billion dollars of capital invested amongst 12 external corporate governance managers and co-investment partners.
Another branch of CalPERS corporate governance is its public identification of companies that are not meeting their profit expectations. Every year, CalPERS issues a list of mismanaged organizations, which it calls the â€œCalPERS Focus Listâ€â€”made up of the poorest long-term performers in the firmâ€™s domestic stock portfolio. The companies that appeared on the focus list in 2009 are Eli Lilly, Hill-Rom Holdings, Hospitality Properties Trust and IMS Health.
One essential tenet of CalPERS philosophy is that representation among the shareholders is essential to getting their financial goals accomplished. Some may call them bulldogs, but CalPERS simply believes that proxy battles are a necessary way to achieve shareholder democracy, something that wouldnâ€™t naturally occur in a system notorious for rubber stamping the corporate managementâ€™s nominees. Access to the proxy is so important to the company that in May 2007, it sent representatives to testify at a series of SEC roundtables to address the issue. CalPERS executives also continue to put the pressure on the SEC with repeated visits to all five of the SEC commissioners and SEC Chairman Christopher Cox in order to advance its agenda.
An example of CalPERSâ€™s battle for shareholder democracy in action is its latest tussle with United Health Care. On May 29, 2007, it submitted a shareholder proposal for proxy access and received 43 percent of shareholder vote in favor of the nonbinding initiative, a powerful turnout for a first vote. United Health Care opposed the measure, claiming that proxy access would be â€œdisruptive, divisive and expensiveâ€ for the company. CalPERS is so devoted to making inroads on the corporate board of United Healthcare, it set up its first ever web site to support an initiative of this kind, which can be found at healunitedhealthgroup.com.
In October 2007, CalPERS started applying pressure of a similar kind to the Sara Lee, one of the few companies that does not give its shareholders the right to amend bylaws by a majority vote. It was backed by four proxy advisory companies in its battle against Sara Lee: Egan-Jones, Glass Lewis, Institutional Shareholders Services and Proxy Governance. On October 25th, an overwhelming 81 percent of shareholders voted on a nonbinding resolution that called for Sara Lee to change its voting laws. CalPERS owns 4.2 million shares of Sara Lee stock.
400 P Street
Sacramento, CA 95814
Phone: (916) 795-3829
Employer Type: Government Agency
President: Rob Feckner
2006 Employees (All Locations): 1,924