Who's in CalPERS' Doghouse?

The California Public Employees’ Retirement System (CalPERS) today named five companies to its 2008 Focus List. This year’s list, which singles out companies for poor performance and weak corporate governance practices, includes The Cheesecake Factory, a restaurant company; Hilb Rogal & Hobbs, an insurance-brokerage firm; Invacare, a health care equipment supplier; La-Z-Boy and Standard Pacific, both in the household durables and homebuilding sectors.

“We’re shining the light on lackluster portfolio companies over serious governance and financial performance issues,” said Rob Feckner, CalPERS board president. “Besides having sub-par stock performance, these companies refused to address corporate governance issues that have a bearing on how they perform in the market.”

CalPERS has filed shareowner resolutions to eliminate staggered boards of directors at The Cheesecake Factory, Hilb Rogal & Hobbs, La-Z-Boy, and Standard Pacific.

“We hope these companies will work with us to improve their governance practices,” said George Diehr, Chair of the CalPERS Investment Committee. “Our goal is to improve stock performance, financial health, and alignment with company owners.”

The Cheesecake Factory underperformed industry peers by 140.5 percent in the five years ending February 2008, according to CalPERS which has filed a shareholder resolution opposing its supermajority voting requirements and staggered board terms that make it difficult to hold directors accountable.

CalPERS also seeks a “clawback” policy to recoup executive compensation based on fraudulent behavior or erroneous performance figures, a majority vote policy for directors in uncontested elections, and the right of shareowners to act by written consent on an issue outside the annual meeting.

Hilb, Rogal & Hobbs underperformed its peers by 42.3 percent over the five years ending February 2008. CalPERS opposes its supermajority voting requirements, staggered or “classified” board, and the absence of majority vote and clawback policies.

 
Invacare trailed peers by 122.7 percent over the five-year period. The pension fund wants the company to declassify its board so directors will stand for election at the same time, and to adopt a majority vote policy.

La-Z-Boy lagged peers by 40.9 percent over the past five years. CalPERS wants the company to declassify its board.

Also trailing its peers by 79 percent was Standard Pacific. CalPERS is seeking declassification of the company’s board, elimination of its supermajority requirements, and adoption of a majority vote policy.