Flexing some financial muscle

Well before the Enron collapse and other corporate scandals prompted Congress to set down corporate governance requirements in the form of the Sarbanes-Oxley Act, a number of the largest institutional investors were using the muscle the scale of their stock holdings provided in an effort to influence corporate behavior.

The California Public Employees’ Retirement System has long been at the forefront of those efforts, and hasn’t tired of the fight yet, yesterday releasing its latest list of companies the nation’s largest public pension fund is citing for what it sees as lackluster financial performance.

Among those finding a spot on CalPERS 2007 Focus List is Marsh & McLennan Cos. Inc., whose stock has “underperformed relative to the S&P 500 and its industry peer index” over the past one, three and five year periods, the $230 billion pension fund said.

CalPERS other beefs with Marsh appear to include what it considers excessive executive severance packages–the fund is pushing a shareholder proposal this year that would require that Marsh seek shareholder ratification of any severance agreement providing benefits with a total present value greater than 2.99 times the officer’s combined base salary and target bonus.

Other companies in CalPERS focus this year include Sara Lee, Eli Lilly & Co., Tribune Co., International Paper Co., Tenet Healthcare Corp., EMC Corp., Dollar Tree Stores Inc., Corinthian Colleges Inc., Kellwood Co. and Sanmina-SCI Corp.

Inclusion on CalPERS annual list might not be all bad, though. The pension fund cites a Wilshire Associates study that suggests the “CalPERS Effect” shows the stock of focus list companies outperforms the S&P 500 Index by 3.1% per year over the five years following their time in CalPERS spotlight.

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