CalPERS put five companies on its annual focus list today for poor financial performance and corporate governance practices: The Cheesecake Factory Inc., La-Z-Boy Inc., insurance brokerage firm Hilb Rogal & Hobbs Co., health-care equipment supplier Invacare Corp. and homebuilder Standard Pacific Corp.
Each company on the list is “a poster child for bad performance and bad corporate governance … and (has) made no effort to change their practices,” said Eric Baggesen, CalPERS acting senior investment officer of global equity, in a conference call.
The $237.5 billion plan is pushing to eliminate staggered boards of directors at The Cheesecake Factory, Hilb Rogal & Hobbs, La-Z-Boy and Standard Pacific. It is also conducting a “no” vote campaign against directors up for re-election at all of the companies’ annual meetings.
CalPERS owns $6 million of stock in The Cheesecake Factory, which returned 6% vs. a 140.5% industry peers’ return for the five years ended Feb. 29. The plan opposes supermajority voting requirements to amend company bylaws and the board’s staggered terms. CalPERS also wants a clawback policy to recoup executive pay based on fraudulent behavior or inflated performance.
Hilb, Rogal & Hobbs trailed peer performance by 42.3% in the five years ended Feb. 29. CalPERS opposes supermajority voting requirements, the staggered board and the absence of majority vote and clawback policies. CalPERS holds $4.9 million in company stock.
Invacare underperformed by 122.7% in the five-year period, has a staggered board and lacks a majority vote policy. CalPERS’ investment is $10.3 million. La-Z-Boy lagged peers by 40.9% over the past five years and has a staggered board. CalPERS’ investment is $3.5 million. And homebuilder Standard Pacific underperformed over the past five years by 79.4%. CalPERS’ investment is $1.5 million, and it seeks removal of staggered board terms and supermajority requirements, and adoption of a majority vote policy.
Dale LaPorte, senior vice president and general counsel for Invacare, said the company is disappointed CalPERS put it on the list, especially because it agreed to many of the plan’s requests, including adding a clawback policy and removing supermajority requirements, and because Invacare’s stock return relative to peers was 26.8% for the year ended Feb. 29. Others on the list also made some concessions.
But Invacare will not budge on changing its staggered, or classified, board. “We continue to believe the classified board is in the best interest of long-term shareholders,” Mr. LaPorte said.
La-Z-Boy officials also disagree with CalPERS regarding its staggered board, said company spokeswoman Kathy Liebmann. “We think we’ve been very proactive in ensuring the company has good corporate governance policies,” she added.
The other companies on the list did not respond by press time to requests for comment.
