CalSTRS released proposed standards for "the perfect stock option plan, including charging earnings for the cost of stock option grants and having options carry dividend equivalents. The $90 billion California State Teachers Retirement System, Sacramento, commissioned the recommendations for reforming executive stock options plans from Graef Crystal, a compensation expert. CalSTRS will add the recommendations to the factors it uses in deciding how to vote proxies and in discussions with portfolio companies, as well as promoting them to other institutional investors, said Sherry Reser, CalSTRS spokeswoman. Mr. Crystal also said company boards of directors should make options repricing economically equivalent when the stock price falls, and indexing the strike price of stock options to the performance of a market or peer-company benchmark.
Separately, CalSTRS approved searches for one or more active domestic equity managers for its new developing manager program, as well as one or more corporate governance/relational managers. The sizes of the allocations have not yet been determined. Funding will come from a $3.5 billion shift to active from passive U.S. equities, previously approved by the systems investment committee.