CalPERS Adopts Softened Governance Rules

The board of the California Public Employees’ Retirement System approved a set of corporate governance standards, albeit ones that are less stringent than those originally proposed a year ago. The standards are designed to get companies to produce more independent and assertive boards. They represent the latest move by CalPERS, the U.S.’ largest public pension fund, to push companies to be more responsive to shareholders. “The principles represent the evolution and ongoing development of CalPERS corporate governance program,” said William D. Crist, president of the fund’s board. If the fund had adopted the original standards it discussed last June, it would have been on the cutting edge of shareholder activism. Instead, the fund got rid of the most aggressive standards, such as recommending that directors who sit on a board for more than 10 years be considered company insiders. It also dropped a proposal that boards not have directors over age 70. Under the adopted standards, boards should “consider the issue of continuing director tenure” and take steps to ensure the board “maintains an openness to new ideas and a willingness to critically reexamine the status quo.”