The California Public Employees' Retirement System, Sacramento, has joined in a shareholder derivative lawsuit against Leonard Tow, the chairman and chief executive officer of Citizens Utilities Co., relating to his compensation and certain decisions by the board regarding Century Communications, a subsidiary of which Mr. Tow also is CEO.
This is believed to be the first lawsuit by an institutional investor over CEO compensation. It also is unusual in that Citizens Utilities, Stamford, Conn., is a company whose stock has performed well.
In recent years, the fund's corporate governance efforts have focused on poor performers. The fund owns 762,000 shares of the company.
Despite the company's strong performance, Mr. Tow's pay package is far too generous, said Richard Koppes, general counsel of the California fund.
The case was filed in Delaware Chancery Court by several large individual shareholders in June.
"It just seems like this board is a doormat," Mr. Koppes said, noting officials tried to get the company to agree to reforms.
Citizens has filed a motion to dismiss the case.
- Marlene Givant Star