The political activism in business affairs of the California Public Employees’ Retirement System (“Calpers”) — one of the nation’s most powerful institutional investor — is leading to a nasty public fight over its leadership.
Sean Harrigan, the president of the Calpers, is expected to be fired today. The move comes amid a growing controversy over Calpers’ boardroom-governance crusades in regard to companies in which it invests and its interference in operational affairs not directly related to protecting its investments.
I’m betting that the primary source of the problem with Mr. Harrigan is his advocacy of a new conflicts-of-interest policy for corporate boards’ outside auditors that prompted Calpers to cast proxy votes against even popular company directors, such as Warren Buffett. Mr. Harrigan also pushed for such out-of-place causes as aggressive investigations into the prisoner-abuse scandal in Iraq and rationalized that move because of Calpers’ small stake in a company that was involved in providing support services in Iraq. Finally, Calpers led the effort to oust Richard Grasso as head of the New York Stock Exchange and campaigned for Walt Disney Co. Chief Executive Officer Michael Eisner‘s resignation as chairman earlier this year.
Despite the rather odd approach to corporate governance issues, Calpers posted solid investment returns for the year ended June 30. It reported a 16.7% one-year return on its global investments and a 20.8% return on its U.S. stock holding, which is better than its benchmark index (the Wilshire 2500).
Nevertheless, Mr. Harrigan’s legacy will be of attempting to micromanage the affairs of several companies in which Calpers invested. Such a policy gets a lot of press in the short run, but does not make many friends in the business world in the long run.