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Royal Dutch/Shell on list for poor financial and corporate governance

cnn.com: Royal Dutch/Shell on list for poor financial and corporate governance

June 9, 2004: 6:54 PM EDT

Posted 10 June 04

SAN FRANCISCO (Reuters) – Calpers, the biggest U.S. pension fund, said on Wednesday it had placed Walt Disney Co., Royal Dutch/Shell, Emerson Electric Co. and Maytag Corp. on its “focus list” for poor financial and corporate governance performance.

Each of the four companies requires corporate governance reforms to “restore long-term profitability and investor confidence,” said Sean Harrigan, president of the California Public Employees’ Retirement System, best known as Calpers.

Disney, Emerson Electric and Maytag were not immediately available for comment.

Royal Dutch/Shell spokeswoman Bianca Ruakere said the oil company has started to address shareholder concerns similar to those raised by Calpers.

“We have already conducted a very thorough review,” Ruakere said. “If we have not implemented changes, we are in the process of implementing them.”

Calpers said in a statement it put Disney on its focus list because of “continuing issues with corporate governance” at the entertainment conglomerate.

The $166-billion pension fund, an aggressive corporate governance watchdog and shareholder rights activist, and other state pension funds have accused Disney’s board of being a rubber stamp for management and criticized the company’s long-term strategy.

Disney (DIS: Research, Estimates) shares edged lower in after hours trading on Inet, and Royal Dutch (RD: Research, Estimates) closed down 0.8 percent.

Emerson Electric (EMR: Research, Estimates) closed down 1.2 percent and Maytag (MYG: Research, Estimates) fell 0.5 percent.

Demand for Disney CEO ouster dropped

The funds led a protest at Disney’s March annual meeting, but relations appeared to have improved after a May meeting between pension leaders and some Disney board members.

Calpers did not repeat calls for Chief Executive Michael Eisner’s ouster after the May meeting, and after the meeting funds said they liked Disney’s response to their issues and were waiting for actions such as linking executive pay to company performance and setting up an ad hoc committee of investors.

Calpers put Royal Dutch/Shell on its list because the company’s stock has lagged its peers for five years and because the company restated oil reserves downwards twice this year. Additionally, Calpers said it is concerned the company’s board has failed to respond effectively to shareholder demands.

Emerson Electric was put on Calpers’ list because of its board structure and because of a retirement package for its chairman, which Calpers called “excessive.”

The fund said it wanted Emerson to reduce employee representation on its board, declassify the board by the 2005 annual meeting and renegotiate terms of board Chairman and Chief Executive Charles Knight’s contract.

Calpers noted that Maytag’s stock has lost more than 40 percent of its value over the last five years through March 31 and the company’s debt has “drastically” increased.

Additionally, the fund said Maytag’s board had refused to implement shareholder-backed proposals. Calpers said it wants Maytag to declassify its board by the 2005 annual meeting, seek shareholder approval of a poison-pill provision and adopt formal equity ownership requirements for its directors.

“Maytag is a model of an entrenched board,” said Rob Feckner, chairman of Calpers Investment Committee. “They have turned their back on shareowners for six years. We believe it is time for Maytag to strengthen its governance.”

Calpers says companies placed on its focus list have a history of corporate reform that helps lift share prices and improve returns to investors.

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