AMD Investors - "Advanced Micro Devices (AMD) makes its third appearance on CalPERS list. AMD's board of directors recently earned the title of "Worst Board" by Business Week magazine in January 2000.
Despite recent gains in the market, the supplier of integrated circuits has had only three quarters of profitability in the last two and half years. An EVA evaluation performed for CalPERS by Stern Stewart & Associates revealed that cumulative EVA over the last three years was a net loss of $900 million. Although CalPERS recognizes that some of this negative EVA is attributable to AMD's heavy investment in future products, investors' concerns with the ability of AMD to earn an appropriate return on the increased investment in the face of strident competition from industry-leader Intel is clearly in the performance of AMD shares.
CalPERS has filed a shareholder proposal seeking to require that the Board's Chairperson be an independent director. "
Paul
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newsalert.com
February 22, 2000 18:42
CalPERS Issues Corporate Governance Focus List for 2000 Proxy Season
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SACRAMENTO, Calif.--(BUSINESS WIRE)--Feb. 22, 2000--The California Public Employees' Retirement System (CalPERS) today released its list of 10 U.S. companies that will serve as the primary focus of the pension fund's corporate governance activism for the 2000 proxy season.
The line-up of underperformers includes two retail companies, a bank, and seven other corporations selected for their lagging long-term financial and economic performance.
The companies are Advanced Micro Devices of Sunnyvale, California; Bob Evans Farms of Columbus, Ohio; Crown Cork and Seal of Philadelphia, Pennsylvania; A.G. Edwards of St. Louis, Missouri; First Union Corporation of Charlotte, North Carolina; Intergraph Corporation of Madison, Alabama; Lone Star Steakhouse & Saloon of Wichita, Kansas; J.C. Penney Company of Plano, Texas; Phycor of Nashville, Tennessee; and Rite Aid of Camp Hill, Pennsylvania.
CalPERS "Focus List" of companies was selected from the pension fund's investments in more than 1,600 U.S. corporations based on their long-term stock performance, corporate governance practices, and an economic value-added (EVA) evaluation.
"Corporate governance reforms are needed for these companies to restore long-term profitability and confidence," said William D. Crist, President of CalPERS Board of Administration.
Lone Star Steak House finds its way on the list with some of the worst performance in the restaurant industry. For the five-year period ended December 31, 1999, the company's stock was down more than 55 percent, while it's peer group in the S&P Midcap Restaurants Index was up nearly 7 percent.
Lone Star has taken some positive steps to address CalPERS concerns with the company's governance, including agreeing to perform annual evaluations of the CEO, form a Nominating Committee comprised solely of independent directors, and study the compensation of the Board. However, Lone Star has recently chosen to cut-off communications with CalPERS and declined to adopt more meaningful governance reforms at the company. The company has refused to consider adding two independent directors, appointing a lead independent director, and instituting a Board self-evaluation.
"Lone Star's insular attitude is indicative of the corporate governance weaknesses at the company that has contributed to the company's poor performance," said Charles P. Valdes, Chair of CalPERS Investment Committee.
CalPERS has filed a shareholder proposal with Lone Star that would amend the company's bylaws to require the Board be comprised of a majority of independent directors.
J.C. Penney Company was named for its disappointing share price relative to its retail industry peers. The company's stock price was down nearly 45 percent for the five-year period ended December 31, 1999, while the S&P Retail Department Stores Index gained more than 43 percent.
CalPERS believes that the market has lost confidence in management's ability to turn the company around given eroding sales and its deteriorating customer base. Penney's Board has also refused to implement multiple shareholder proposals that were approved by a majority of voting shareowners that would declassify the company's board of directors and redeem their poison pill.
CalPERS will pursue a shareholder proposal filed with J.C. Penney urging the company to hold annual elections for its board of directors.
Advanced Micro Devices (AMD) makes its third appearance on CalPERS list. AMD's board of directors recently earned the title of "Worst Board" by Business Week magazine in January 2000.
Despite recent gains in the market, the supplier of integrated circuits has had only three quarters of profitability in the last two and half years. An EVA evaluation performed for CalPERS by Stern Stewart & Associates revealed that cumulative EVA over the last three years was a net loss of $900 million. Although CalPERS recognizes that some of this negative EVA is attributable to AMD's heavy investment in future products, investors' concerns with the ability of AMD to earn an appropriate return on the increased investment in the face of strident competition from industry-leader Intel is clearly in the performance of AMD shares.
CalPERS has filed a shareholder proposal seeking to require that the Board's Chairperson be an independent director.
Several companies on the CalPERS "Focus List" have agreed to a number of corporate governance changes. These include:
Bob Evans Farms
-- Commitment to separate the Chair and CEO positions;
-- Elected a lead independent director.
Crown Cork and Seal
-- Adopted a bylaw to require that a majority of directors be
independent.
A.G. Edwards
-- Commitment to restructure the board to include a majority of
independent directors;
-- Commitment to establish a Nominating Committee consisting
of independent directors and the CEO;
-- Commitment to make director compensation more competitive, and an
agreement to pay 50 percent in stock; and
-- Commitment eliminating any involvement of management in
establishing the compensation of the CEO.
First Union Corporation
-- Designate a lead independent director; and
-- Future Nominating Committee will not include CEO.
Intergraph Corporation
-- Appoint three additional independent directors;
-- Appoint a lead independent director; and
-- Form a Compensation Committee and Nominating Committee comprised
solely of independent directors;
Phycor
-- Maintain a majority of independent directors on the Board;
Rite Aid has also been proactive in discussions with CalPERS during a time of extensive management restructuring. The company has indicated that corporate governance issues will be a top priority in forthcoming Board and management changes.
"We're pleased that many companies have listened to us and recognize the importance of good corporate governance practices," added Valdes. "We are grateful of their willingness to work with us and wish to acknowledge that effort."
CalPERS is the nation's largest public pension fund with assets totaling more than $171 billion. The System provides retirement and health benefits to more than 1 million state and public employees and their families.
Fact Sheet
CORPORATE GOVERNANCE
CalPERS Focus List At-A-Glance
Company CalPERS CalPERS Shareholder Proposal
Holding
(in shares)
Advanced Micro Devices 1,168,740 Board's Chairperson be an
Independent Director
Result of Company Meeting:
-- None
Bob Evans Farms 317,822 None
Result of Company Meeting:
-- Committed to separate the Chair and CEO positions;
-- Elected a lead independent director.
Crown Cork and Seal 227,300 None
Result of Company Meeting:
-- Adopted a bylaw to require that a majority of directors be
independent.
A.G. Edwards 233,400 None
Result of Company Meeting:
-- Will restructure the board to include a majority of independent
directors;
-- Will establish a Nominating Committee consisting of independent
directors and the CEO;
-- Will make director compensation more competitive, and an
agreement to pay 50 percent in stock; and
-- Will eliminate any involvement of management in establishing the
compensation of the CEO.
First Union 5,091,209 Board's Chairperson be an
Corporation Independent Director
Result of Company Meeting:
-- Will designate a lead independent director; and
-- Agreed that future Nominating Committee will not include CEO.
Intergraph Corporation 428,100 None
Result of Company Meeting:
-- Will appoint three additional independent directors;
-- Will appoint a lead independent director; and
-- Will form a Compensation Committee and Nominating Committee
comprised solely of independent directors.
J.C. Penney 1,430,100 Declassify the Board
Result of Company Meeting:
-- None
Lone Star Steak House 389,400 Majority of the Board be
comprised of Independent
Directors
Result of Company Meeting:
-- Will perform annual evaluations of the CEO;
-- Will study the current compensation of the Board and portion paid
in stock.
-- Will form a Nominating Committee comprised solely of independent
directors.
Lone Star has taken some positive steps to address CalPERS
concerns, but has recently chosen to cut-off communications with
CalPERS and declined to adopt more meaningful governance reforms.
CalPERS believes that this attitude is indicative of the
corporate governance weaknesses at the company which has
contributed to the company's poor performance.
Phycor 572,700 None
Result of Company Meeting:
-- Will maintain a majority of independent directors
Rite Aid 1,317,000 None
Result of Company Meeting:
-- Rite Aid has been proactive in discussions with CalPERS during a
time of extensive management restructuring at the Company. Rite
Aid has indicated that corporate governance issues will be a top
priority in forthcoming Board and management changes.
CONTACT: CalPERS Office of Public Affairs
Brad Pacheco/Pat Macht, 916/326-3991
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