SACRAMENTO, Calif. — CalPERS' annual focus list unveiled April 19 singled out six U.S. companies — including Mellon Financial Corp. — for poor financial and corporate governance performance. The other firms are: Brocade Communications Systems Inc., Cardinal Health Inc., Clear Channel Communications Inc., OfficeMax Inc. and Sovereign Bancorp.
"The stock performance and governance of these companies is unacceptable to us and other shareowners," Rob Feckner, president of the California Public Employees' Retirement System, Sacramento, said in a statement. "We are urging them to make such improvements as requiring majority voting for directors, removing excessive takeover defenses that prevent shareowners from amending company bylaws, and accounting for their performance."
"In the coming months, we will continue to work with these companies to find ways to turn them around," Charles P. Valdes, chairman of the $208.3 billion system's investment committee, said in the statement.
CalPERS seeks to eliminate supermajority requirements to amend bylaws at Pittsburgh-based Mellon and Brocade Communications, San Jose, Calif. Brocade stock's total return fell 68% in the five years ended March 31, compared with a 4.7% gain for its industry. Mellon's total return was -2%, compared with a 58% gain for industry peers for the save five years, the statement added.
OfficeMax, Itasca, Ill., has excessive takeover defenses, including an 80% supermajority requirement to amend bylaws, the statement said, adding the company's total return of 6.25% compared with 59% for its industry peers.
Sovereign Bancorp, Philadelphia, "has excessive takeover defenses, including 80% supermajority requirements to amend specific charter and bylaw provisions, limited shareowner rights, and the rare provision of severance agreements for directors," the statement said. Sovereign was up 168% in the five years, compared to 17.9% for its peer group, the statement said. But for the year ended March 31, its total return was -0.22%, compared with a 4.7% total return for its peer group.
Dublin, Ohio-based Cardinal Health's stock value gained 17% over the five-year period, compared with 109% for the industry. It has a 75% supermajority requirement and excessive severance agreements, the statement said.
Clear Channel Communications, San Antonio, which has excessive executive compensation and severance agreements, had a total return of -42% in stock value over the five years, compared with -26% for industry peers.