Financial Times: The pension fund finger can point both ways
By Paul Betts
Jun 15, 2004
In its latest "focus list" of underperforming companies, the $165bn California state employees' pension fund Calpers has pointed the finger at three US multinationals (Walt Disney, Maytag and Emerson Electric) and one European (Royal Dutch/ Shell) in greatest need of improving corporate governance and financial practices.
Featuring on the blacklist of the US's largest public pension fund and champion of shareholder activism tends to make big corporations come out in a rash.
The problem with the Calpers list is that it confuses two issues - objective criteria based on stock performance with its own subjective views on the true and proper principles of governance. That said, Calpers' aggressive approach has stirred things up and could usefully be exported to the fledgling European pension fund industry.
Pension funds on a US scale are few and far between in Europe. Most are pretty passive. But the gradual capitalisation of state pension systems will create a new class on a par with large US funds. Hopefully these will be as exacting as the Calpers of this world, although their demands are likely to be different.
If large US funds with growing European portfolios are naming and shaming European companies, their future European counterparts could well return the compliment. US companies failing to meet their continental criteria, such as introducing European social standards, risk a rocketing.