OTish:CalPERS Adopts Plan to Tackle Abusive Executive Compensation; System to Target Focused List of Directors, Corporations and Compensation Consulting Industry
SACRAMENTO, Calif.--(BUSINESS WIRE)--Nov. 15, 2004--The California Public
Employees' Retirement System's (CalPERS) Board of Administration today
approved a focused plan to reign in abusive compensation practices in
corporate America and hold directors and compensation committees more
accountable for their actions.
The plan calls for CalPERS to advocate for executive compensation reforms on
a national level by addressing issues of transparency and design with the
Securities and Exchange Commission, the financial exchanges, and the
compensation consulting industry.
The System will also wage a campaign against targeted individual
compensation committee directors who support egregious pay packages and
companies that have the worst compensation practices, as well as recognize
corporations who are leaders in pay for performance.
Levels of executive compensation have skyrocketed in recent years, creating
a vast gap between the pay of top executives and average workers.
According to Businessweek, the average Chief Executive Officer salary has
grown to 535 times the average workers salary in 2000 from 42 times in 1980.
In 2003, CEO median cash pay -- base salary and bonus -- was up 14 percent
to about $2 million from $1.75 million, according to a study of Standard &
Poor's 500 companies conducted by Equilar.
"This will be a focused approach to today's most serious problem," said Sean
Harrigan, President of CalPERS Board. "We will recognize the good guys who
compensate for performance and we will call out some prime examples of those
who are hurting long-term shareowner value by paying for lack of performance."
"Compensation can be so obscene that we need to tackle the problem
structurally and hold accountable selected individual directors who create and
support abusive pay packages," said Rob Feckner, Chair of CalPERS Investment
Committee. "We will call on other institutional investors and allies to join
us in this campaign."
Under the plan, CalPERS will pursue six major pay for performance
initiatives over the next three years. They include:
-- Submitting a comprehensive proposal to the Securities and
Exchange Commission in 2005 that calls for greater
transparency of compensation packages;
-- Strengthening listing standards at the securities exchanges
and self-regulatory organizations to promote greater
communication and transparency between listed companies and
investors;
-- Urging the compensation consulting industry to adopt practices
that better aligns boards and management with shareowners;
-- Targeting a limited number of corporations in 10 market
sectors with the worst compensation practices to move their
executive compensation philosophy and practice toward greater
pay-for-performance concepts;
-- Publicly withholding support from a focused list of certain
corporate compensation committee members who develop and
support egregious pay packages; and
-- Recognizing companies and individuals who use superior pay for
performance practices.
A copy of CalPERS Executive Compensation Strategic Plan can be found on its
website at www.calpers.ca.gov, click CalPERS Board Meeting information, then
Investment Committee, then item 6d.
CalPERS is the nation's largest public pension fund with assets of
approximately $168 billion. The System provides retirement and health benefits
to more than 1.4 million State and local public employees and their families.
AI
