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CalSTRS calls for guidelines on executive pay.

Byline: (Staff Writer)

With risky behaviour and excessive executive pay blamed for fuelling the economic crisis, the California State Teachers' Retirement System (CalSTRS) is calling for more responsible executive pay policies.

CalSTRS has launched an initiative that calls on 300 of its portfolio companies to develop comprehensive executive compensation policies and to allow shareholders advisory votes on those policies. It says that the goal is to reward long-term thinking and improve pay-for-performance practices while deterring excessive risk taking.

This initiative includes the publication of executive compensation model policy guidelines guidelines, a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks.
 and communication with targeted companies that stresses using those guidelines.

Advantages to adopting the CalSTRS-proposed model guidelines are said to include the development of long-term views on compensation and the setting of baselines for evaluating the effectiveness of the resulting compensation programs.

"CalSTRS has a long history of promoting responsible compensation policies that link pay to performance and align shareholder and management interests," said Anne Sheehan, CalSTRS director of corporate governance Corporate Governance

The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law.
. "We see our efforts as key to improving long-term returns and meeting our fiduciary duty Noun 1. fiduciary duty - the legal duty of a fiduciary to act in the best interests of the beneficiary
legal duty - acts which the law requires be done or forborne
 to California's teachers and their families."

The CalSTRS initiative started with letters to 300 of its largest holdings communicating the fund's support for an advisory vote on compensation.

To help companies develop compensation policies, CalSTRS provided model principles and guidelines that include key elements of a policy along with goals and objectives to consider in developing a policy. The CalSTRS principles offer companies a five-part approach that calls for:

A clear overarching o·ver·arch·ing  
1. Forming an arch overhead or above: overarching branches.

2. Extending over or throughout: "I am not sure whether the missing ingredient . . .
 philosophy that aligns the interests of shareholders and management;

A well designed, comprehensive compensation policy that takes a detailed look at all of its components;

Transparency through a plain-English description of a well-crafted compensation plan;

Accountability through a responsible compensation committee;

A compensation committee comprised of independent directors using only independent advisors and consultants.

"Our model policy and principles for executive compensation seek to bring coherence coherence, constant phase difference in two or more Waves over time. Two waves are said to be in phase if their crests and troughs meet at the same place at the same time, and the waves are out of phase if the crests of one meet the troughs of another.  to an exceedingly ex·ceed·ing·ly  
To an advanced or unusual degree; extremely.


very; extremely

Adv. 1.
 complex issue," Sheehan said. "There are no easy answers to addressing the problem of poorly aligned executive compensation. But nothing can be achieved without the communication and agreement between companies and shareholders called for in our guidelines."

CalSTRS said it will follow up with targeted companies through stepped-up communications, emphasising use of the guidelines and, if necessary, withholding Withholding

Any tax that is taken directly out of an individual's wages or other income before he or she receives the funds.

In other words, these funds are "withheld" from your wages.
 proxy votes Proxy vote

Vote cast by one person or entity on behalf of another.
 on directors and compensation plans.

The California State Teachers' Retirement System, with a $111.6 billion portfolio, is the second largest public pension fund in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college districts.

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Publication:CPI Financial
Date:May 14, 2009
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