California Public Employees' Retirement System
September 10, 2003
Jonathan G. Katz
Re: File No. S7-14-03
Dear Mr. Katz,
I am writing to you on behalf of the California Public Employees' Retirement System (CalPERS). CalPERS is the largest public pension system in the U.S., with approximately $144 billion in assets. We manage retirement benefits and health insurance on behalf of nearly 1.3 million members.
CalPERS is pleased to provide comment on the Commission's proposed rule on disclosure regarding Nominating Committee functions and communications between shareowners and Boards of Directors. We applaud the Commission's decision to further pursue the Nominating Committee disclosure standards currently found in Item 7 of Exchange Act Schedule 14A and require enhanced disclosure. We support the intent of the proposed disclosure requirements to ensure transparency of the policies of Boards of Directors, with the goal of providing shareowners access to the directors, as well as a better understanding of the functions and activities of the boards of the companies in which they invest.
Overall, CalPERS is very supportive of the Commission's responsiveness to public concern regarding the process for nominating candidates for elections as directors and the ability of shareowners to communicate effectively with Boards of Directors. CalPERS recognizes as a shareowner that we must strike a balance in our communication with Boards. Shareowners should be provided access to boards; however, we realize too much communication may effectively distract the Board.
The Commission requests input on specific questions addressed in this proposal. CalPERS regards increased disclosure as an effective means to increase shareowners' understanding of the nominating process, board accountability, board responsiveness and governance policies. CalPERS consistently advocates that companies provide shareowners detailed information to enhance understanding of their processes. We support transparency as a rule. Furthermore, we agree that identifying the process under which candidates are identified and evaluated including the qualifications and standards for director nominees, the source of these candidates and naming third parties receiving compensation for identifying and evaluating candidates, provides shareowners better tools to evaluate the election process and individual board members.
CalPERS advocates the requirement that investors be provided a copy of the Nominating Committee Charter upon request. In fact, we have advocated that companies post committee charters on their web sites. Not only has this caused no harm to the companies, it may actually decrease the burden placed on the company from forcing shareowners to request the material. We agree that the proposed changes should apply to all companies, including small companies and mutual fund companies, with registered securities.
Although we believe the Commission's proposed amendments would mark a substantial step forward if adopted "as is," we would like to offer a few suggestions for strengthening these proposals:
Additionally, issues not addressed in this proposed release in which CalPERS recommend be included:
Thank you for the opportunity to comment. Please feel free to contact Ted White, Director, Corporate Governance, at (916) 341-2731 with any questions.