Risk & Compliance

Calpers Targets AT&T, Sears, Ford

Many directors fell afoul of the pension fund's familiar audit/nonaudit guideline.
Stephen TaubMay 10, 2004

Calpers last week said it will withhold votes for directors at nearly 20 companies, including AT&T, Sears, and Ford. Most of the newly named companies are holding their annual meetings this week.

At AT&T, as in a majority of the prior cases, Calpers is opposing directors because their audit committees permitted auditors to provide nonaudit services. However, the pension giant has also singled out additional reasons for withholding votes.

For example, Calpers is opposing four nominees at Sears, Roebuck and Co. because for two years they failed to implement a shareholder-approved proposal to declassify the board. The pension fund is also supporting a proposal that the company submit poison pills to a shareholder vote and a proposal that the company create a majority-vote shareholder committee.

At Ford Motor Co., Calpers will oppose the nominations of seven board members. Four nominees — Stephen Butler, Irvine Hockaday Jr., Ellen Marram, and Jorma Ollila — fell afoul of the pension fund’s familiar audit/nonaudit guideline.

In addition, it is withholding its vote for John Bond, a member of the compensation and nominating committees, because he is group chairman of HSBC, which provides investment banking services to the auto giant. Calpers also opposes former Treasury Secretary Robert Rubin, a member of the compensation and nominating committees, because he is chairman of the executive committee of Citigroup Inc., which also provides investment banking services to Ford.

Calpers also singled out John Thornton, a member of Ford’s nominating committee, because he is a senior advisor as well as a former president and co-COO of Goldman Sachs, which provides investment banking services to the company. The pension fund also frowned on the fact that in fiscal year 2003, Thornton attended less than 75 percent of the meetings held by the board and the committees on which he served.

At Amgen Inc., Calpers will oppose nominee Jerry Choate, the chairman of the compensation committee and a member of the audit committee, because he is the father of one Amgen executive and the father-in-law of another.

Calpers also opposes the nomination of Duke Energy Corp.’s Michael Phelps, a member of the nominating committee, because of a severance deal received by the former chairman and CEO of Westcoast Energy Inc. when that company was acquired by Duke in 2002. Through March 2004, Phelps received about $30,000 a month in addition to other compensation as part of a non-compete agreement with the company, as well as a lump-sum payment of $2 million upon the expiration of the agreement.

Understanding Which ERP Modules Your Business Needs – And When