The California Public Employees’ Retirement System (CalPERS) has endorsed a policy briefing paper that advocates independent chairmanships in public corporations across the United States and Canada.
“Chairing the Board, the Case for Independent Leadership in Corporate North America,” was published by The Millstein Center for Corporate Governance and Performance, Yale School of Management Policy.
The paper says increasing numbers of companies are adopting the independent chair model as a way to more closely align corporate boards with shareowners, curb conflicts of interest, better manage the relationship between the board and chief executive officer (CEO), and lead to the development of an independent board.
“Managing the board is a separate and time-intensive responsibility that should be under leadership that is separate from the CEO’s job of managing the company,” said Rob Feckner, CalPERS Board President. “We strongly endorse this proposal to split the chair and CEO leadership roles, which already is an objective of our own set of global corporate governance principles.”
The paper also recommended that boards should adopt independent chairmanships as voluntary and proactive step to restore market trust during times of economic crisis.
CalPERS joined more than 50 endorsers of the paper, which was published on March 30, 2009 with the backing of the International Corporate Governance Network (ICGN), other pension funds, corporate board chairmen and chief executives.
“Besides CalPERS, policies of the ICGN and the Council of Institutional Investors support the position that the board of directors should be chaired by an independent director,” said George Diehr, Chair of the CalPERS Investment Committee. “Otherwise, the CEO and chairman roles should be combined only in very limited circumstances that should be explained to shareowners in proxy materials. If there are combined roles in such cases, the board should name a lead independent director.”
The Millstein Center policy paper can be found in the CalPERS Press Room at www.calpers.ca.gov.
CalPERS, with approximately $174 billion in assets, is the largest public pension fund in the U.S. It administers retirement benefits for more than 1.6 million active and retired State, public school, and local public agency employees and their families on behalf of 2,600 California public employers, and health benefits for nearly 1.3 million members.
For additional CalPERS corporate governance information please visit www.calpers-governance.org.