A state panel ousted activist corporate reformer Sean Harrigan as president of the California Public Employees Retirement System on Wednesday. But despite the shakeup, the pension behemoth is expected to pursue its crusade to reform how corporations operate.
Harrigan, a grocery union official, was replaced on the CalPERS board by Ronald Alvarado. The shakeup came when the state's Personnel Board decided not to re-elect Harrigan to the CalPERS board by a 3-2 vote, instead choosing Alvarado.
Harrigan was elected president of the board in February 2003, defeating then-San Francisco Mayor Willie Brown. The 13-member CalPERS board will vote on a new president.
As president, Harrigan successfully urged CalPERS to become more aggressive in pressing companies to reform their practices on multiple fronts.
Most recently, the CalPERS board voted in favor of a Harrigan-sponsored policy calling on CalPERS to vote against corporate directors who allow excessive executive pay. Before that, CalPERS had attempted to oust Pleasanton-based Safeway Inc. Chairman and Chief Executive Steven Burd and prodded The Walt Disney Co. to change its management.
"I am extremely disappointed that this happened," Harrigan said in a statement. "I want to assure everyone that CalPERS will not back down from the strong leadership role that has helped to strengthen our markets, promote accountability, and restore much-needed integrity to the financial markets. Removing one person will not reduce the strength, the commitment, nor the resolve to fight for our members."
Some outside observers agreed that might be the case. The pension fund is expected to remain at the forefront in efforts to improve how companies are governed, said Andrew Williams, a director of the Center for the Study of Fiduciary Capitalism at St. Mary's College in Moraga.
"CalPERS will continue to be a leader in corporate governance reform and activism by institutional investors," Williams said. "After all, these policies are CalPERS board policies. Though Harrigan was the president of the board, he was one vote on the board."
What's more, although its efforts have intensified in recent years, CalPERS has been an aggressive figure in the investment world for more than a decade.
"There will not be any fundamental change in the CalPERS position," Williams said. "They have held this activist position for 15 or 20 years. They have a big reputation in this area, and they have been very effective."
But an official with one corporate watchdog group, Oakland-based CorpWatch, was dismayed by Harrigan's ouster.
"It's a tragedy that Harrigan has lost his job," said Pratap Chatterjee, CorpWatch's director. "Chief executives are making more and more money, and nobody is doing anything about it. The system is broken, and we need people like Harrigan to act as watchdogs."
Alvarado himself supported corporate reforms during his previous tenure on the CalPERS board from 1996 through 1999. During that period, the pension fund committed itself to a prominent leadership role in corporate activism. Ironically, Harrigan had previously replaced Alvarado as the Personnel Board's representative to CalPERS.
Alvarado was appointed to the Personnel Board by former Gov. Pete Wilson, while Harrigan was appointed by former Gov. Gray Davis.
Alvarado promised an even-handed approach in his new post.
"I have one mission while on the CalPERS board: to join my colleagues on that board to fulfill my fiduciary responsibility of maximizing the current and future value of the funds," Alvarado said. "I have no agenda for labor or for management."
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