Pension Fund Activism

[ronin]

Teachers’ Pension to Seek Corporate Governance Improvements

Sacramento, CA – The California State Teachers’ Retirement System has placed five companies on its Workplan of poor corporate performers. The publicly held companies within the pension system’s $133 billion fund have consistently produced disappointing returns and have fallen short of accepted corporate governance practices. CalSTRS will work closely and cooperatively with these companies with the expectation that they show improvement.

“As a long-term investor, we cannot trade away our disappointment in poor performers. We have an obligation to California’s educators to engage these companies and work toward rehabilitating the health of portfolio assets,” said Jack Ehnes, Chief Executive Officer of CalSTRS. “We believe this long-term approach as coach and partner with our Workplan companies over time adds value not only to the companies but also to our portfolio.”

The current Workplan companies are:

Compuware Corp. – Detroit, MI
Level 3 Communications, Inc. – Broomfield, CO
Sirius Satellite Radio, Inc. – New York, NY
Solectron Corp. – Milpitas, CA
UnumProvident Corp. – Chattanooga, TN

What do you think about this?  Is it the fund's duty to reform corporate America or maximize returns for its client?  (or I guess something in between).  I'm tempted to say take the dogs out behind the barn and shoot them.  Isn't it enough of a wake-up call when a fund the size of CalSTRS dumps you?

 

[brewer12345]

I am intimately familiar with one of the nags in the list they put out. If it is representative of the rest of them, I would either sell outright, or start putting forth your own slate of directors. Ain't no way the sleazebags running the place are about to clean up their act.

 

[Patrick]

Aren't they saying that they can't sell those companies, so they are trying to help them improve their performance? Maybe their holdings are too large to sell without taking huge losses? If so, that reflects poorly on the fund managers, and they should fire themselves!

 

[HFWR]

That'll be the day...

 

[yakers]

Bogle recently referred to our market as primarily owned by instutional interests, In this case IMHO CSTRS is doing a good thing in asserting ownership interests. Like really big mutual funds its hard for a fund this big to take small positions in companies. Ultimately they may come to "own" them and should offor board members and other oversight for the interests of the investors.

 

[Nords]

Aren't they saying that they can't sell those companies, so they are trying to help them improve their performance?  Maybe their holdings are too large to sell without taking huge losses?  If so, that reflects poorly on the fund managers, and they should fire themselves!

Maybe they're feeling guilty or just chasing deep-value stocks.

They can fix the boards and the companies like Warren Buffett does, or they can sell them for the tax losses like Jim Cramer or William O'Neill. They probably don't want to have to discuss the losses, so they'll try to emulate Buffett!