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SACRAMENTO, Calif. -- Two of the nation's largest pension funds
could adopt tougher corporate-governance policies to protect company
employees and their retirement plans from future debacles such as
Enron's, under changes proposed Tuesday by state Controller Kathleen
Connell.
Ms. Connell made her proposal Tuesday in letters to the lead
counsels of the California Public Employees Retirement and
California State Teachers Retirement funds. Ms. Connell is a member
of each of the funds' governing boards. Calpers is the nation's
largest pension fund, and the teacher's fund is the nation's
third-largest.
Calpers spokeswoman Patricia Macht says the board "is obviously
concerned about this issue," and that Ms. Connell's recommendations
"will be taken under advisement and will be discussed when the full
board meets next on this issue."
In her letter to pension fund officials, Ms. Connell recommended
four specific changes to each fund's corporate-governance policy. As
proposed, they would apply to any publicly traded company in which
Calpers or the teachers fund "holds a significant equity stake," and
require those companies to "adhere to higher standards of protection
for employees' defined contribution plans." Ms. Connell didn't
quantify what would constitute a "significant" equity stake. The
changes are:
- Employees would not be required to invest in their company's
defined contribution retirement savings program.
- For those employees who choose to do so, and where the company
matches a percentage of employee contributions, the employees
would have the option to receive the match in a form other than
the company's stock.
- Again, for employees who choose to participate in their
company's defined contribution retirement savings program, no more
than 10% of the employee's savings may be invested in the
company's stock.
- Within the bounds of federal rules and regulations, employees
who choose to invest in company stock through a defined
contribution program will always have the ability to liquidate
that stock.
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