CALPERS CONSIDERS SEEKING SEATS ON BOARDS.

Byline: Doug Willis Associated Press 

The California Public Employees' Retirement System, the nation's biggest pension fund, is drafting a new policy that would allow it to seek seats on boards of corporations in which it is a major stockholder.

But representatives of the $127 billion pension fund have no plans to seek or accept any board seats in the foreseeable future, and the proposed policy doesn't target any specific companies, Calpers spokeswoman Patricia Macht said Friday.

In recent years Calpers has taken a more activist posture as an investor, sometimes seeking meetings with corporate executives and pressuring them to make changes to improve earnings or protect stockholder equity.

For example, Calpers pushed directors to replace the under-performing leaders of General Motors Corp., Eastman Kodak Co. and International Business Machines Corp. But Macht said there is no relationship between the pension fund's more activist role as an investor and the new policy on holding board seats.

``Anyone who thinks this is a new weapon in our arsenal for corporate governance is going down the wrong track,'' she said in a telephone interview.

Instead, Macht said, the fund's board of administration found in a routine review that it had no written policy regarding the holding of seats on corporate boards, then asked its staff to draft a proposal.

``The board of administration asked for this proposal in order to codify what has been practice for the last 15 years, which is not to serve on boards, even in instances where we hold a huge equity stake,'' she said.

Macht added that news accounts focusing on conditions under which Calpers would consider having a board seat misinterpret the intent of the proposal.

``Historically, we have declined to be represented on corporate boards,'' she said. ``Even when we are a controlling shareholder, our practice has been not to designate a Calpers representative on the board.'' She said that practice will not change.

The new policy would allow Calpers to consider seeking or accepting a seat on a corporate board only under very limited circumstances, she said. ``The first is that the level of ownership would be that we are a controlling shareholder. The next condition is that it must be the opinion of the investment committee that the benefits of representation outweigh the risks.''

Macht said risks such as increased liability exposure, potential conflicts of interest and insider status, which could restrict Calpers' freedom to trade in a firm's stock, make it unlikely that any occasion would arise in which the board would find benefits outweighing risks.

During the 15 years that Calpers has had a corporate governance policy, it has never had a representative on any corporate board, Macht said. She said she also doubts that Calpers ever held a corporate director's seat before that time.

The new policy got unanimous approval at the board's Dec. 15 meeting and is scheduled for a final vote Feb. 17.

About $84.7 billion of Calpers' assets are invested in more than 1,500 domestic and foreign corporations. One million employees or retirees of state government and of 2,430 local-government agencies in the state are members of Calpers.