Activist President of CALPERS Ousted

Sean Harrigan’s two-year stint as head of the California Public Employees Retirement System (CALPERS) came to an abrupt end on Wednesday when the California State Personnel Board voted 3-2 to remove him as its representative to the CALPERS board. Under Mr. Harrigan’s leadership, CALPERS has seen its assets rise to $177 billion today from $161 billion a year ago, and that 2003 figure is up 22.3% on 2002, the highest ROI for CALPERS since 1995. It is difficult to see how his removal was anything other than a political decision.

Mr. Harrigan is an official in the United Food and Commercial Workers Union. While president, he has led CALPERS on an activist shareholder trail, pursuing such issues as global warming and excessive executive pay. Trying to get rid of Michael Eisner at the Walt Disney Company and Steven Burd at Safeway, Inc. are the more high profile efforts Mr. Harrigan has undertaken. This year, CALPERS withheld its support from directors at over 2,400 companies, some 80%, in which it owns stock. That appears to have been too much for the Personnel Board, which votes every December on its representative to the CALPERS board. In his place, the Personnel Board has chosen former real estate executive Ron Alvarado.

State Treasurer Phil Angelides, who is also on the CALPERS board, has said that the pension fund will continue its activist style. And CALPERS board member Rob Feckner has said he will run for the vacant position to continue in the same vein. One hopes so, but there can be no mistaking the fact that a real estate business man has replaced a union official.

With fund assets outperforming the market, there was clearly no financial or economic case for removing Mr. Harrigan. The political reasons become evident when one considers that his defeat came on a 3-2 vote. The pretext given by Maeley Tom, a Personnel Board member who voted for Mr. Alvarado, said that other Personnel Board members should get a chance to sit on the CALPERS board. Why didn’t Harrigan ally William Elkins get the nod then? The political balance of power would have gone unchanged while the face did. No, the swing vote came from Anne Sheehan, who is Governor Schwarzenegger’s appointee and executive director of the California Building Industry Foundation, a homebuilders’ advocacy group.

This is the real fight within American business, and it will go on for a long time. Does management run the company as the shareholders want it run, or is management entitled to Stepford Shareholders who acquiesce to huge salaries, massive retirement packages and endless perks even when the company fails to perform? Mr. Harrigan may be a union man, but he spoke for the shareholders.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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