City & Business: Out and proud and pushing for profit

There are more than 200 British companies with a pressing need to familiarise themselves with the activities of the California Public Employees' Retirement System. Calpers is not a West Coast cult with suicide on its mind but one of the US's most revered and feared pension funds. Best known for its ritual humiliation of underperforming companies, it is now preparing to bring its corporate governance principles to the UK.

Calpers has been building relationships with European and Japanese institutional investors in an attempt to develop a consensus on a corporate governance agenda. Last week Kayla Gillan, Calpers' general counsel, was in London preaching the governance gospel. Her preaching, she admits, was to the converted. Ms Gillan has nothing but admiration for corporate governance in this country.

While there is no doubt that standards of governance have improved significantly in Britain, there is a danger of complacency creeping in. There was just a sense from Ms Gillan that she had been told ever so politely that our grandmothers already know how to suck eggs. So while the general mood of her meetings with institutions was one of unmitigated commitment to ever firmer governance there were still indications that perhaps Calpers was pushing things just a little too far.

For instance, Calpers believes that boards should have a majority of independent directors. This causes difficulties for British institutions. An independent director, in Calpers' view, is much more robust than a non-executive director. The British do not think it feasible to have a majority of independent directors.

It would be a shame if institutions misinterpreted Calpers' fierce promotion of governance as an example of pushy American interference. Calpers has been careful not to be seen to trying to export its code lock, stock and barrel. For example, the fund's infamous "outing" of underperforming companies has never been taken outside the US. Publishing an annual list of the10 worst companies in the Calpers portfolio attracts much attention and has proved to be a very effective tool. This is seen by many institutions as excessive and "un-British". They prefer understated, covert pressure to get things done.

In fact, there is no great difference between the Calpers and the British approaches. Calpers' list of underperformers is but the final step in a six-month process.

It first approaches companies privately, pointing out that it is the duty of management to run the business effectively on behalf of shareholders. This is normally the catalyst for a reversal of fortune. Independent analysis shows that Calpers' intervention has a quite dramatic impact on performance. A study by Wilshire Associates revealed that 62 companies targeted by Calpers had on average underperformed the Standard & Poors Index by 85 per cent in the five years before they were outed. In the five years after Calpers intervened the same stocks outperformed the S&P Index by 33 per cent. This brought an extra $150m a year in returns to the fund - not bad for a programme that costs $500,000 a year to run.

Calpers is planning to introduce a similar approach to its investments in Britain. It will not happen immediately, but is very much part of Calpers' governance thinking.

What is most surprising, then, is that very few British companies have taken the trouble to acquaint themselves with Calpers. No doubt an unfortunate oversight that will soon be rectified. The Calpers Effect can be extremely beneficial for a company. It is better to acquire this benefit than have it thrust upon you.

Listen to the Oracle

WHO better than Larry Ellison, chairman and chief executive of software giant Oracle, to launch the first electronic virtual takeover bid? Ellison, in a personal capacity, and a band of investors have made it known that they may be interested in taking control of Apple, the struggling computer company. Bid battles on the information super highway are clearly different to those fought in more conventional territory. In a virtual bid the first thing you do is not appoint a merchant banker but set up an e-mail address.

The next step, it seems, in Ellison's bid strategy is to canvass the views of Apple staff, shareholders, customers and anyone else on the future of the company. Correspondents are asked via e-mail whether Apple can benefit from new management and what should be the single top priority if the Ellison investor group were to secure control.

This is an extremely efficient way of preparing for a bid. If enough people, particularly shareholders, indicate their support then Ellison will no doubt be encouraged to take the takeover into the real world.

This kind of behaviour would not be warmly embraced by our Takeover Panel. But in this electronic age who is to say that the virtual bid will not become more commonplace? It may not be an issue for the Panel now, but it will become one.

A real windfall

With the opinion polls still indicating a Labour victory at the general election the prospect of the imposition of a windfall tax draws ever nearer. Perhaps the Labour manifesto will shed some much-needed light on the practicalities of what will be a more complex tax than many have assumed - but that may be hoping for too much.

Opposition to the tax has been quite muted. The utilities, who are expected to bear the brunt of any levy, remain quite sanguine. Although they do not relish a tax that either shareholders or customers, or both, will have to pay for, they are quite prepared to keep a low profile providing the burden is reasonable and does not become an annual event.

Of more concern is stability in the regulatory regime. The utilities believe that more lasting damage would be done by an upheaval of the regulatory framework. If the price for consistency in regulation is a windfall tax, then it is well worth paying.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence