SACRAMENTO, Calif. - The $80 billion California Public Employees' Retirement System has added a second and powerful punch to its corporate governance watchdog unit - Sheryl Pressler, chief investment officer and a former McDonnell Douglas Corp. executive.
In a shake-up of how it will handle corporate governance, the fund will downplay slightly the role of its new chief executive officer, James Burton. Mr. Burton replaces Dale Hanson, who resigned in July.
However, officials say the fund will depend on its longtime general counsel - Richard Koppes - to spearhead corporate governance domestically and internationally. Mr. Koppes will be backed up by some fund trustees as well as Ms. Pressler.
Ms. Pressler, who joined the fund in April after serving as director of retirement funds management at McDonnell Douglas, has high-level corporate experience missing from the resumes of most other California fund officials. Trustees expect her to add new insights and make the fund's already formidable corporate governance efforts more effective as it begins an international effort. Ms. Pressler's predecessor, DeWitt Bowman, had virtually no role in corporate governance, say trustees.
Some trustees' own interest in direct involvement in corporate governance supports their longtime claim that Mr. Hanson pursued - or perhaps terrorized - American corporations only at the behest of the trustees.
As CEO, Mr. Hanson visited about 65 corporate CEOs and is believed to have played a role in the ouster of top executives at Westinghouse Electric Corp., Eastman Kodak Co. and IBM Corp. The California fund also pressured corporate boards to be more accountable at General Motors Corp., ITT Corp., Occidental Petroleum Corp. and Lockheed Corp. The retirement system also has been the leading fund in corporate governance at the Council of Institutional Investors, an association of public funds.
Fund trustees said they remain committed to a strong corporate governance program. But they add Mr. Burton will have a less flashy role in it and spend more time on administrative services than did Mr. Hanson.
"Corporate governance at CalPERS is not a one-man band, but the band is going to be led by Mr. Koppes and (Ms.) Pressler, and shared among a number of principals involved," said Jake Petrosino, a fund trustee.
"If (Mr. Burton) does his job, he won't make the press," said Mr. Petrosino.
"I don't think we are going to see a picture of Jim Burton on the front cover of Esquire holding a gun," said Charles Valdes, chairman of the fund's investment committee, referring to a magazine picture published of Mr. Hanson holding a shotgun for corporate head-hunting.
Mr. Hanson, before resigning to work in the private sector, was criticized by some California fund officials for seemingly spending too much time on corporate governance when the fund was thought to have suffered from mediocre investment performance and imperfect performance in delivering benefit administrative services.
Mr. Hanson for several years chastised domestic corporations that fell behind peer performance in investment returns.
It later turned out the California fund's investment performance was superior, the opposite of what the trustees were told originally, but some concerns about Mr. Hanson spending too much time on corporate governance remained.
" Mr. Hanson was so very colorful; the press liked him and his photograph showed in so many magazines," said William Crist, president of the board of the California Employees' fund.
But the media attention on Mr. Hanson didn't sit well with the fund's employee members when service wasn't perfect, said Mr. Petrosino. When measured against such similar entities as insurance companies and other public pension systems, "we're not performing at an acceptable level," he said.
Still, published reports that the retirement system's corporate governance program will be less adversarial are "just a bunch of hooey," said Mr. Valdes.
Mr. Crist said corporate governance always has been a team effort, and many of the fund's corporate analysts never got the credit for their work. Mr. Crist, a business professor and economist, said he believes it was a myth built by the media that Mr. Hanson spent so much time on corporate governance.
But even before Mr. Burton's selection, trustees had decided the CEO would spend more time on benefit issues, said Mr. Crist.
Mr. Burton and Ms. Pressler couldn't be reached for comment.
Mr. Koppes was interim CEO until Mr. Burton's selection. Mr. Koppes has long been involved in corporate governance. Some trustees who may be increasingly involved in corporate governance include Mr. Crist - who said he has met with pension officials interested in corporate governance in the Netherlands - and Mr. Valdes, who said he has met with pension fund executives interested in corporate governance in Australia and Japan.
Mr. Burton's primary concern will be service and administration of the program, said Mr. Petrosino.
Mr. Crist said the California fund will continue its program, begun two years ago, of requesting private meetings with executives and boards of corporations that are targets of concern. If fund officials are rebuffed, the fund will file shareholder resolutions and express its concerns to other pension funds and the media.
Even with the broadening of corporate governance responsibilities, Mr. Crist said Mr. Burton will play an important role in holding corporations accountable to shareholders.
Mr. Crist said Mr. Burton was one of the original advocates of corporate governance. Mr. Burton attended many early meetings of the Council of Institutional of Investors representing Jesse Unruh, former California state treasurer and founder of the council.
Early in 1992, Mr. Burton became assistant CEO, replacing Basil Schwan, who became CEO of the Washington State Investment Board, Olympia.
Meanwhile, trustees are considering restructuring the investment and administrative offices. The restructuring eventually might allow Mr. Burton to have more time for corporate governance.
As the fund expands corporate governance internationally, it will be looking especially at Japan and the United Kingdom, where it has significant foreign stock holdings.
Officials also will look at emerging markets, using labor laws as one corporate governance yardstick for them, said Mr. Petrosino.