CalPERS and the Power of Pension Fund Activism
/What long-term investors taught Wall Street about board accountability
When most people think of shareholder activism, they picture hedge funds pressuring companies for quick wins. But some of the most influential and enduring corporate governance reforms in the U.S. have been driven not by hedge funds, but by public pension funds—and the gold standard of this strategy is CalPERS.
In a landmark study by Del Guercio and Hawkins (1999), researchers analyzed CalPERS’ campaign strategy targeting underperforming companies with entrenched governance structures. Their findings? Engagements initiated by CalPERS led to statistically significant improvements in both firm performance and governance in the years following proposal filings.
📌 What Made the CalPERS Model Work?
It focused on long-term economic value, not just market optics.
Proposals were filed at companies with governance red flags: staggered boards, golden parachutes, poor oversight.
CalPERS used its public accountability and reputational leverage to demand reforms—like board independence, executive pay realignment, and improved disclosure.
What’s more, many of these proposals never even required a shareholder vote to drive change. The reputational pressure alone often pushed boards to act.
🧭 Why It Still Matters Today
In a world increasingly focused on ESG performance and systemic risk, the CalPERS model offers a blueprint for responsible, credible, and effective shareholder engagement. These campaigns weren’t speculative—they were laser-focused on fixing structural weaknesses that posed financial and reputational risk.
Pension funds still rely on Rule 14a-8 to elevate concerns at annual meetings. Without that right, the gains of the last 30 years—like improved director accountability and board independence—could easily erode.
🔗 Learn more from the 1999 Landmark Study- The Motivation and Impact of Pension Fund Activism