CalPERS asked 5,000 shareholders of Shaw Group Inc., Baton Rouge, La., to support a proposal calling for shareholder approval of excessive severance compensation for departing executives, according to a news release. The proposal from the $228.4 billion California Public Employees' Retirement System, Sacramento, would require shareowner ratification of severance packages valued at more than 2.99 times an executive's salary and target bonus.
"Historically, the Shaw Group compensation committee approved some of the most egregious severance and change-of-control provisions ever to catch the attention of CalPERS," Christianna Wood, CalPERS senior investment officer, global equity, said in a letter to shareowners. "We are not seeking to limit severance payouts, but we do believe that shareowners should have the ability to approve certain large payouts."
The proposal, if adopted, would still give Shaw "the flexibility it needs to attract qualified individuals to serve in officer positions," Ms. Wood wrote. "If management delivers performance, why wouldn't shareowners approve payouts that reward them for this performance?"
Shaw's board opposes the proposal. "Executives would not have agreed to leave their existing employment to join Shaw if the negotiated severance benefits were not provided or were otherwise 'at risk' because of the requirement for subsequent shareholder action," according to a statement from the company.
CalPERS owns 337,799 shares in the company, according to another CalPERS statement. Shaw's annual meeting is Jan. 30.