The December announcement by America's biggest pension fund that it may place its own representatives on the corporate boards of some major companies is sending a shock wave through corporate America. The proposed policy shift by the $126 billion California Public Employees' Retirement System (CalPERS) is a radical break from the current "hands off" boardroom approach of big investors. Yet the move is "part of a trend that's likely been inevitable for years" says Ralph D. Ward, speaker and writer on boards. He discusses the implications in the January issue of his new online newsletter Boardroom INSIDER.
"For most of the 1990s, big institutional investors like CalPERS and other investor activists have been narrowing the definition of what makes a good corporate director" notes Ward. "After setting goals like strong director independence from management, large personal investment in the company, a long-term commitment, and friendliness to shareholder rights, the big institutions have pretty well defined the ideal board candidates as themselves."
Among the concerns Ward sees if this trend grows:
Ward, who predicted this trend in his 1997 book The 21st Century Corporate Board (John Wiley & Sons), finds that big funds like CalPERS and other relationship investors do not really hanker after their own seats in the boardroom due to the serious conflict of interest and insider issues that would arise. Yet by "shaping the ideal director in their own image, they've left themselves little choice."
Ralph Ward's Boardroom INSIDER ... is the monthly online newsletter that searches out the savvy and experience that makes our best boards so effective, and compiles it into a lively, fast-reading shared body of knowledge. Seasoned directors, corporate secretaries and counsels, and board consultants offer their first-person "nuts and bolts" tips for making the boardroom run more efficiently... finding and working with good directors... and managing the tricky personal issues that arise "behind boardroom doors." Delivered via email for the greatest immediacy. For more info visit the Ralph Ward webpage at:http://www.boardroominsider.com. Ralph D. Ward is also a business speaker, and is author of the book 21ST CENTURY CORPORATE BOARD (John Wiley & Sons).
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