The $80 billion California Public Employees' Retirement System has filed shareholder proposals at three poor-performing companies as a wake-up call to managements to restore shareholder value.
Although the fund initially targeted 10 companies in its investment portfolio, it so far has whittled that list down to Boise Cascade Corp., U.S. Shoe Corp. and Zenith Electronics Corp. And, fund officials soon are expected to take Zenith off as well.
The giant pension fund already has withdrawn shareholder proposals filed at USX Corp. and Navistar International Corp., after both companies agreed to incorporate the pension fund's requests.
Decisions on filing proxy resolutions have been delayed for CPI Corp. and First Mississippi Corp. until meetings - scheduled for later this month and February - are held with those companies' chief executives.
And, while noting the performance of Eastman Kodak Co., International Business Machines Corp. and Westinghouse Electric Corp. continues to put them at the bottom of the heap, fund officials decided to give their new chief executives until next year to fix performance problems.
Boise Cascade, with which the giant pension fund had reached an agreement last year on improving its relationship with shareholders and softening an anti-takeover defense, is back on the list this year because "they didn't follow through on what they had agreed to do," said Chief Executive Dale Hanson.
The Boise, Idaho-based paper company had last year agreed to work with the pension fund to measure the quality of its products against competitors.
Mr. Hanson said Boise Cascade's failure to do that was among the reasons the fund filed a shareholder proposal - eliminating staggered terms for directors - for the company's April 22 annual meeting. "We continue to be very frustrated," Mr. Hanson said.
"As fiduciaries representing the interest of shareholders, if they are not willing to perform the monitoring function that is incumbent on them, the only viable recourse to shareholders is a vote of no confidence," Mr. Hanson said.
Fund officials also are concerned about the company's failure to improve its performance, Mr. Hanson said. The company ranked 969 out of 1,000 in financial performance, as measured by a Stern Stewart & Co. model.
But Robert Hayes, a spokesman for the company, disputed assertions about its poor performance, and said the company intends to recommend shareholders vote against the California pension fund's proposal. Mr. Hayes also noted shareholders had voted to install a staggered board in the mid-1980s, and nothing had changed since then.
Mr. Hayes also noted the company's 1993 financial performance was considerably better than in 1992. The company last week reported a net loss of $77.1 million or $3.17 per share, compared with a net loss of $227.5 million in 1992, or $6.73 per share. After excluding special charges in both years, the company lost $83.6 million, or $3.34 per share in 1993, compared with a loss of $154 million or $4.79 per share the previous year.
Mr. Hayes also referred to a letter he said Mr. Hanson had sent to Boise Cascade Chairman John B. Fery last September, in which Mr. Hanson said the board was "almost a 'model' for corporate governance." But the same excerpt also noted Boise Cascade had "still not gained the confidence of the investment community."
The public pension fund is seeking a similar annual board election policy at U.S. Shoe, a Cincinnati-based shoe manufacturer that is considering spinning off its three divisions to shareholders as a way of lifting its sagging stock price.
And at Chicago-based Zenith, which has been losing money for years and whose stock has plummeted from the mid-$30s in 1987 to about $7 recently, the giant pension fund has requested that non-employee directors pick, from among themselves, a leader "to act as a counter-balance to the centralized power of the CEO/chairman of the board."
That proposal might be withdrawn because fund officials have met with Jerry K. Pearlman, Zenith's chief executive, and other senior executives.
Mr. Hanson said fund officials also had some "useful" meetings with U.S. Shoe's board members, but continue to be concerned about the performance of the shoe division. In recent months, the company has reshuffled management, and sold several of its money-losing LensCrafters stores in England.
The company also is considering a restructuring of its three key divisions - footwear, optical and apparel - and a shoe company has reportedly expressed interest in purchasing the company's shoe division.
California fund officials also are watching what the shoe company intends to do to restore shareholder value.
"Clearly they are interested in having us withdraw our proposal, but we made no promise in that regard," Mr. Hanson said.
Bob Burton, a spokesman for U.S. Shoe, said the meeting earlier this month between four independent directors and officials of the California fund was "productive." Mr. Burton said the company offered pension fund officials substantive information about the makeup of the U.S. Shoe's board.
"We characterize ourselves as still in discussion with CalPERS," Mr. Burton said.