Calpers, the largest U.S. pension fund, placed Royal Dutch/Shell, Walt Disney Co., Emerson Electric Co., and Maytag Corp. on its 2004 “focus list.” Translation: The companies are “both poor economic performers and have corporate governance structures that do not ensure full accountability to company owners,” according to the fund.
“Corporate governance reforms are needed for these companies to restore long-term profitability and investor confidence,” said Sean Harrigan, President of Calpers, in a statement.
Calpers’ Focus List is selected from the more than 1,800 U.S. companies that the fund in. The fund bases its selection on the companies’ long-term stock performance, corporate governance practices, and an economic value-added (EVA) evaluation.
EVA measures a company’s net operating profit after tax, minus its cost of capital. Calpers claims that by using EVA and stock performance, it has pinpointed companies where poor market performance stems from underlying financial performance problems, rather than such factors as the industry the company’s in alone.
Calpers said Maytag is on the list because its stock lost more than 40 percent over the last five years and its debt has surged drastically. “The company’s board refused to implement two shareowner proposals that have passed by a majority vote during the past six years,” it added.
Calpers wants Maytag to declassify its board by the 2005 annual meeting, seek shareowner approval of its poison-pill provision, and adopt formal equity-ownership requirements for its directors.
Royal Dutch/Shell was singled out because its stock has underperformed its peers for the last five years and because it restated its oil reserves twice since the beginning of the year, Calpers claims.
Disney made the list “because of its continuing issues with corporate governance,” according to Calpers.
Emerson Electric made the Calpers cut because of its classified board and “the generous retirement package” granted to Charles Knight, its former CEO and current chairman.
A Disney representative didn’t respond immediately to a Reuters request for comment on the entertainment company’s inclusion on the list. An Emerson representative told the wire service that the company “completely” disagrees with Calpers’ assessment.
At Royal Dutch/Shell, spokesperson Bianca Ruakere told Reuters that the company had begun addressing investors’ complaints. Roger Scholten, senior vice president and general counsel at Maytag, said that the company had talked about the pension fund’s complaints and has adopted or is adopting some Calpers suggestions, according to the news service.