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Doug Gamble- Contributor

Doug Gamble is a former writer for President Ronald Reagan and resides in Carmel. [go to Gamble index]

Behind 'Shareholders' Rights' Push
CalPERS board maneuvers are all about politics, not company performance
[Doug Gamble] 4/14/04

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 business operations.

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 boardrooms.

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

Copyright 2004 Doug Gamble




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