Ethics Newsline®

SACRAMENTO
Calpers, the largest U.S. pension fund, last week put pressure on some of the nation’s premier companies, announcing that it would withhold votes for directors who it felt had failed to run firms responsibly and transparently.

Directors at roughly a dozen U.S. firms including American Express, BellSouth, Johnson & Johnson, Kellogg, Sprint, and Wachovia — were targeted by Calpers (California Public Employees Retirement System).

Singled out were Citigroup Inc. director Sanford Weill and CEO Charles Prince, who Calpers accused of having a “significant role” in governance problems, as well as Coca-Cola Co. director Warren Buffett.

Buffett and others are being targeted for allowing the companies on whose boards they sit to contract with firms that provide both consulting and auditing services, allegedly creating a conflict of interest, reported the Reuters news agency.

Calpers also took aim at the entire boards of two firms: Apple Computer for failing to adopt reforms that would treat stock options as expenses, and PG&E Corp. for nixing shareholder proposals on expensing stock options and poison pills, noted Reuters.

The pension fund, which has $167 billion in assets, is seen as a power player that often can get other funds to follow its lead in demanding reform, noted the New York Times.

Shortly following Calpers’ announcement last week, the New York State Common Retirement Fund did just that, announcing that it also would withhold its support for Citigroup’s Weill and Prince.

“Calpers is a bellwether institution among pension funds, and everyone tends to follow their lead because of their size and visibility,” Georgia State University business professor Conrad Ciccotello told the Times. “Any rational decision maker, including Sandy Weill, has to take into account the reputational issues at stake.”

Citigroup spokeswoman Leah Johnson last week called the Calpers decision “unwarranted,” saying the company “adheres to the highest standards of corporate governance.”