CalPERS' governance campaign produces results, report shows

CalPERS' “good governance campaign” has added value to the share price of targeted companies, a report by Wilshire Associates shows.

The $211.4 billion California Public Employees' Retirement System, Sacramento, has been one of the nation's leading activist institutional investors.

Wilshire, CalPERS' consultant, examined 142 companies on the CalPERS “focus list” from the beginning of 1987 to the fall of 2008. The list, announced annually, identifies companies with poor financial and corporate governance performance that will be the focus of CalPERS' shareholder activism for the year.

In the five years prior to CalPERS' involvement, Wilshire found, focus-list companies produced returns that averaged 83.3% below their respective benchmarks on a cumulative basis, or an annualized return of -30.1% per year.

After CalPERS got involved, the companies collectively produced stock returns of 12.7% above their respective benchmark returns on a cumulative basis, or an annualized 2.4% per year.

CalPERS did not issue a focus list in 2010, because most of the companies under consideration to be included on the list improved their shareholder performance and governance practices after CalPERS' staff had discussions with them.