News: Analysis & Commentary: Pension Funds
THIS GADFLY IS REALLY BUZZING
The dreaded list is back. On Feb. 2, the $80 billion California Public Employees' Retirement System planned to release its annual catalog of crummy companies--a distinction based on stock performances and the fund's complaints about management. "We view this as a wake-up call," says CalPERS General Counsel Richard H. Koppes.
The 1995 list is comprised of nine companies, which rank among the 50 worst-performing stocks in the pension fund's portfolio of 1,200 companies. Other factors that can land a corporation a spot: unresponsiveness to CalPERS inquiries, labor practices, and the percentage of shares owned by CalPERS. This year, the unfortunate nine includes Boise Cascade Corp.--a four-time offender--and Navistar International Corp., which has made the list two years running. Others, such as golf-club maker Zurn Industries Inc. and oil and gas producer Oryx Energy Co., are less familiar (table).
WAKE-UP CALL. With the list, CalPERS hopes to persuade corporate boards to force management and strategic changes inside its targeted companies. Toward that end, the pension fund has invited itself to meetings at companies to drill management and directors. And most of this year's offenders are cooperating with the pension fund--possibly because it's the fastest way off the list. Some emphasize, however, that they won't make changes simply because CalPERS wants them to do so. "No decision was driven singly by CalPERS," says Boise's director of investor relations.
Should any of the companies on the CalPERS list fail to make significant alterations, Koppes promises that he won't hesitate to turn up the heat, as he has done in the past. "Filing a shareholder proposal is the buzzer for heavy sleepers," says Koppes. Given CalPERS' clout, few corporate boards that made the 1995 list will want to risk the fund's special brand of shock therapy.
CALPERS' NAUGHTY NINE
BOISE CASCADE The CEO is gone, but CalPERS wants more. It says higher paper prices will help.
KMART After its stock price languished for years, Kmart split the CEO and chairman jobs.
MELVILLE CalPERS is unhappy with the retailer's diversified lines. It has met with CalPERS.
NAVISTAR Chairman's exit should help get Navistar off the '96 list. It's responding to concerns.
U.S. SHOE Board has not signed off on annual elections, and CalPERS says stock is too low.
FIRST MISSISSIPPI Company is seen as unfocused. It says it will review CalPERS' complaints.
JOSTENS It says shuffling execs and cutting costs have helped, but it will meet with CalPERS.
ORYX ENERGY Its stock price has plunged 80% since 1990. Oryx says it is trying to improve.
ZURN INDUSTRIES Maker of generators and golf clubs saw sales fall 50%. It will meet with CalPERS.By Eric Schine in Los Angeles