US - The US$235bn California Public Employees' Retirement System (CalPERS) has ramped up its campaign against the practice of backdating share options.
CalPERS is due to vote today against the re-election of Ray R. Irani to the board of Los Angeles-based home building company, KB Homes, in the company’s annual general meeting.
Irani was chairman of the KB Homes compensation committee at a time when options were backdated. The ensuing scandal led to the company’s first quarterly loss in a decade, a drop in share price of 33% and underperformance compared to its peer of 15.8% in the year to March 2007.
CalPERS owns 551,824 KB Home shares, which are valued at $23.5m.
CalPERS CIO Russell Read commented: “CalPERS believes chairmen of executive compensation committees have the highest level of responsibility and duty to ensure that compensation policies are above board."
"Our action also sends a message to the business community that there are consequences for these scandals."
At the same time, CalPERS received the support of four major proxy adviser services, Egan-Jones, Glass Lewis, Institutional Shareholders Services (ISS) and Proxy Governance, for its proposal to give the shareholders of US pharmaceutical company Eli Lilly the right to amend company bylaws by a majority vote.
CalPERs owns 4.8 million Eli Lilly shares, which are valued at more than $265m.
Commented Read: “This resolution is about shareowners’ quest for corporate democracy.
“The right to amend bylaws is the primary tool for improving the company’s governance practices, which research shows are directly linked to stock performance.”
Some 96% of the other companies listed in the S&P 500 and Russell 1000 indices currently allow shareholders this right.
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