Tuesday, April 13, 2004 | 10:33 a.m.
SUN STAFF AND WIRE REPORTS
SACRAMENTO -- The nation's largest public pension fund Monday said it will oppose Citigroup Chairman Sanford I. Weill's membership on the company's board, saying it believes the nation's largest financial institution would be "better served" by an independent director.
The California Public Employees Retirement System, also known as CalPERS, also announced it will withhold votes from some directors of Coca-Cola Co., Pacific Gas and Electric Co., Sprint Corp. and eight other companies.
"Our vote against Weill is a symbolic vote expressing our belief that he is accountable for the huge scandal, improper practices and conflicts of interest between the investment research department and the investment banking unit within Citigroup," said CalPERS spokeswoman Pat Macht.
CalPERS alleges that Weill, who was the company's CEO from 1998 to 2003, played a "significant role in several scandals to negatively impact the company," according to a CalPERS statement.
In April 2003, Citigroup paid the highest penalty of any Wall Street Firm -- $400 million -- to settle charges that its Smith Barney unit issued fraudulent and misleading research. Citigroup was one of 10 firms that together paid a total of $1.4 billion to settle with securities regulators.
Weill stepped down as chief executive of the company in October but retained the job of chairman.
CalPERS controls 26.7 million Citigroup shares.
"CalPERS' decision to withhold votes from certain Citigroup directors is unwarranted. Citigroup adheres to the highest standards of corporate governance, business practices, accuracy and transparency in its accounting and financial disclosure," said Citigroup spokeswoman Leah Johnson.
CalPERS, which has assets totaling $164.1 billion, is also withholding votes for Chief Executive Charles Prince, and six other Citigroup directors.
CalPERS also announced Monday it is withholding votes for eight members of the Coca-Cola board of directors.
"With respect to Coca-Cola, there are a number of directors who have conflicting business relationships with the company and therefore it raises concerns about the independence of these directors," said Edward Fong, a CalPERS spokesman.
The pension fund also announced it will withhold votes for the entire board of directors of Pacific, Gas and Electric Co., and some members of the company's audit committee.
"The board has failed to implement shareholder-approved proposals," a CalPERS statement reads.
And CalPERS is opposing the re-election of Sprint Corp. director Linda Koch Lorimer, saying she helped commission non-audit work from the telephone company's auditor.
CalPERS will withhold proxy votes on its 7.34 million shares for Lorimer at Sprint's annual meeting on April 20 because she is on the company's audit committee, said Lindy Plaza, a spokeswoman for the pension fund.
Some corporate governance experts have said that auditors' independence may be compromised when they're compensated by clients for other services such as consulting. Sprint's former Chief Executive William Esrey stepped down last year amid pressure over a personal tax shelter he used that was set up by the company's auditor, Ernst & Young LLP.
"While the news is a disappointment, Sprint stands by Ms. Lorimer," said Sprint spokesman Scott Stoffel.
The CalPERS announcement follows a recommendation last week from Institutional Shareholder Services, the largest proxy adviser to money managers, that Sprint shareholders withhold votes for Lorimer. ISS cited separate issues, including Lorimer's membership on the committee that nominates directors and "serious concerns about the effectiveness of the Sprint board and the judgment of the nomination and compensation committees."
ISS complained specifically about the board approving Sprint CEO Gary Forsee's $29.2 million pay package in 2003, calling it excessive.
CalPERS also said on its Internet site that it would vote for shareholder proposals including one that calls for the separation of the chairman and CEO titles that Forsee holds.
Lorimer, 52, is vice president and secretary of Yale University and has been a director of Sprint since 1993.
The Associated Press
and Bloomberg News contributed to this report.
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