NEW YORK -(Dow Jones)- The California Public Employees' Retirement System named the Cheesecake Factory Inc. (NASDAQ-NMS:CAKE) (CAKE), Hilb, Rogal & Hobbs Co. (NYSE:HRH) (HRH), Invacare Corp. (NYSE:IVC) (IVC), La-Z-Boy INC. (NYSE:LZB) (LZB) and Standard Pacific Corp. (NYSE:SPF) (SPF) to its 2008 list of underperforming companies due to concerns about corporate governance and poor financial results.
"Besides having sub-par stock performance, these companies refused to address corporate governance issues that have a bearing on how they perform in the market," said Calpers, as the biggest U.S. pension fund is known, in a press release Tuesday.
Calpers has $6 million in holdings in the Cheesecake Factory (NASDAQ-NMS:CAKE) , $4.9 million in holdings in Hilb Rogal & Hobbs (NYSE:HRH) , $10.3 million in holdings in Invacare (NYSE:IVC) , $3.5 million in holdings in La-Z-boy (NYSE:LZB) , and $1.5 million in holdings in Standard Pacific (NYSE:SPF) .
Calpers said the five companies underperformed their respective peers and resisted appeals to change the boards. Calpers' asked the firms to make bylaw changes easier, eliminate staggered terms of board members, eliminate restraints on shareholders' voting rights, and allow executive compensation to be recaptured if there is fraud or misconduct.
Calpers said Hilb, Rogal & Hobbs (NYSE:HRH) , Invacare (NYSE:IVC) , La-Z-Boy (NYSE:LZB) and Standard Pacific (NYSE:SPF) should "declassify" its boards so directors will be elected at the same time instead of on a staggered basis. The pension fund also wants Hilb Rogal & Hobbs (NYSE:HRH) to adopt a majority voting policy and way to recoup executive pay made as a result of fraud.
According to Calpers, La-Z-Boy (NYSE:LZB) agreed to remove its super majority voting requirements and adopt a majority vote for director elections.
Invacare (NYSE:IVC) should also adopt a majority voting policy and Standard Pacific (NYSE:SPF) should eliminate its "super-majority" voting requirements and adopt a majority- voting policy. Calpers said the firm agreed to remove some "super-majority" voting requirements, disclose its policy to get back executive pay because of fraud, and disclose its annual equity dilution levels.
Calpers recommended the Cheesecake Factory (NASDAQ-NMS:CAKE) change its "spuer-majority" requirement to change bylaws and eliminate staggered board terms. The fund also wants the company to adopt a policy to recover executive pay doled out as a result of fraud. Calpers said the firm agreed to seek shareowner approval to declassify its board.
Calpers has pending shareowner resolutions to eliminate the staggered boards at all the firms but Invacare (NYSE:IVC) .
Representatives at the Cheesecake Factory (NASDAQ-NMS:CAKE) , Hilb Rogal & Hobbs (NYSE:HRH) , Invacare (NYSE:IVC) and Standard and Pacific weren't immediately available for comment.
A spokeswoman for La-Z-Boy (NYSE:LZB) said: "The company prides itself on taking a very proactive stance to ensure we have good corporate governance. Our nomination and governance committee reviews practices and policies regularly and makes decisions based on what's best for all shareholders. Calpers is a shareholder and we listen to all our shareholders and we have a difference of opinion on this issue."
During a conference call, a Calpers official said the pension fund has "made progress engaging and improving companies on last year's list" but there are " still companies that are a work in progress." The official said some companies have agreed to remove super-majority voting requirements and classified board structures.
However, Calpers will be running a vote-no campaign against the board of Eli Lily & Co. (LLY), who was on the 2007 list of underperformers.
Calpers screened more than 1,200 companies and narrowed it down to 15 companies. The fund's corporate governance staff interacted with directors and senior management at those firms, aiming to find common ground that would improve corporate governance and stock performance. Those that didn't not work with the fund were nominated to be included on the focus list.
-By Josee Rose, Dow Jones Newswires; 201-938-5234; josee.rose@dowjones.com
(END) Dow Jones Newswires 03-25-08 1408 Copyright (c) 2008 Dow Jones & Company, Inc.
