The
president of the California Public
Employees Retirement System (CalPERS),
America’s largest public pension fund,
(with US $177 billion in its care
on behalf of 1.4 million members),
was voted off the fund’s board. Sean
Harrigan, a union official, has headed
CalPERS since February 2003. Under
him, it has headed efforts to clamp
down on exorbitant executive pay,
auditors’ conflicts of interest and
much else in companies in which it
has stakes. The CalPERS Personnel
Board, which rescinded Mr. Harrigan’s
appointment, replaced him with a Republican.
Mr. Harrigan claims that California’s
Republican governor; Arnold Schwarzenegger,
teamed up with business interests
to force him out. The governor’s office
stoutly denies such “conspiracy” theories.
The
trouble is not CalPERS’ activism as
such. Since the 1980s the fund has
been agitating for improved corporate
governance. It has homed in on deficiencies
like the use of poison pills to prevent
takeovers and shareholders’ inability
to nominate directors to boards. The
cause is a worthy one, and other state
pension funds have followed CalPERS
lead, albeit more quietly.
What
is next for CalPERS? Mr. Harrigan
says that his departure will not reduce
the fund’s commitment. Steve Westly,
the state controller and a moderate
member of the CalPERS board has vowed
that the fund will continue to lead
battles for corporate governance reform.
Other big public pension funds, though
less politicised than CalPERS, are
watching with interest. Many believe
that, despite Mr. Harrigan’s blundering
and lack of tact, his outsing represents
a coup for opponents of reform.
