Doug Gamble- Contributor
Gamble is a former writer for President Ronald Reagan and
in Carmel. [go to Gamble index]
'Shareholders' Rights' Push
CalPERS board maneuvers are all about politics, not company performance
If Paul Revere
rode today to warn of danger to California businesses and taxpayers,
he might shout something such as, "The
pension fund power-grabbers are coming." Actually, they're
already here, and their attempts to inject special interest
agendas into corporate boardrooms in the guise of shareholders'
rights pose a threat to the state's recovery prospects and
long-term economic health.
In the forefront of the so-called shareholders' rights movement
are public pension funds, largest among them the California Public
Employees Retirement System (CalPERS), representing 1.4 million
public workers. After withholding support from Walt Disney Co.
CEO Michael Eisner at the company's annual meeting in March,
the fund plans to do the same with Safeway CEO and Chairman Steven
Burd and two board members in May.
At the heart of this
blatant interference in corporate affairs is not so much company
performance, as CalPERS and other public
pension funds pretend, but an attempt to broaden their beachhead
in ongoing efforts to impose their will on public companies.
The misleading pension funds' mantra of "corporate democracy" has
now reached the California Legislature, where a bill that would
lower the threshold to allow shareholders to run counter slates
in elections for directors of California-based public companies
comes before an Assembly committee April 19.
What would this bill becoming law mean for California? In a
word, disaster. It would create a reverse gold rush where businesses
flee the state, taking jobs and tax revenue with them. This at
a time when the state is trying to battle from off the economic
ropes and has already suffered an exodus of businesses to other
parts of the country. California's image as the worst place for
a company to do business, create jobs and generate revenue would
turn it into an economic ghost town.
The concept of corporate democracy as peddled by pension fund
leaders is a sham. In fact they represent a leftist oligarchy
more interested in expanding their power base to pursue political
and social engineering causes than in protecting the rights of
shareholders. Their holy grail is success in circumventing corporate
governance procedures to get inside boardrooms and affect everyday
Two of the key players are Democratic Party politicians with
an eye on the governor's office in 2006. When state Treasurer
Phil Angelides and state Controller Steve Westly, in their roles
as CalPERS board members, urge nonsupport of corporate leaders,
one must wonder if they are driven less by the public interest
and more by the desire to get a political leg up.
And with union leader Sean Harrigan heading its board, CalPERS
has become adept at talking the language of Wall Street, wrapping
itself in the rhetoric of increasing shareholder value and return
on investment. But this masks an alternative effort to consolidate
power at a time when traditional union methods are failing. No
longer able to achieve its goals at the bargaining table or the
ballot box, labor's clever solution is the takeover of corporate
Pension funds cannot concentrate on their fiduciary duty to
invest prudently in the sole interests of the work force if they
are off slaying the dragons of political and social activism.
Notably, in an example of the kind of politically correct crusading
favored by Westly and Angelides, CalPERS trustees voted to divest
tobacco stock over the objections of its professional staff.
The stocks subsequently outperformed the market.
If public pension funds fail to meet their obligations to retirees
because of misguided investment decisions, it is the taxpayers
who will have to bail them out.
The convergence of labor and pension fund agendas, political
ambitions of elected officials and legislation allowing unprecedented
interference in the business operations of California-based public
companies threatens a perfect storm of economic devastation.
Here's hoping it gives way to the sunshine of public enlightenment. CRO
2004 Doug Gamble