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Vanderbilt Law Review

First Page

315

Abstract

In recent years, the California Public Employees Pension System ("CalPERS") has received extensive attention for its active participation in corporate governance. CalPERS's activities established it as a leader among activist institutions. CalPERS's Murray and Kathleen Bring Professor of Law, New York University School of Law. T.J. Maloney Professor of Business Law, Fordham Law School. Thanks to Jeff Gordon, Keith Johnson, Un Kyung Park, Wayne Schneider, Damon Silvers, Randall Thomas, and John Wilcox for their valuable help in project design and for their useful comments.

Strategy was based on identifying underperforming companies with poor governance practices and then working to change those governance practices and improve performance. Through its implementation of this strategy, CalPERS was at the forefront of broader-based initiatives to increase shareholder monitoring, initiatives that included the use of shareholder proposals to improve corporate governance and support of the SEC's shareholder direct access proposal. CalPERS also embraced Congress's invitation to public pension funds to take an active role in monitoring securities fraud class actions through its visible and influential role in the high- profile Cendant litigation.

CalPERS has served as a case study for many as a model of institutional activism. Academics, regulators, and policymakers have looked to the examples of CalPERS and several other public pension funds to support the claims that institutional investors can use their substantial equity stakes and sophistication effectively to overcome collective action problems, and that institutional activism can improve corporate performance. Public pension funds hold approximately 20% of publicly traded U.S. equity and, according to the U.S. Census trategy was based on identifying underperforming companies with poor governance practices and then working to change those governance practices and improve performance. Through its implementation of this strategy, CalPERS was at the forefront of broader-based initiatives to increase shareholder monitoring, initiatives that included the use of shareholder proposals to improve corporate governance and support of the SEC's shareholder direct access proposal. CalPERS also embraced Congress's invitation to public pension funds to take an active role in monitoring securities fraud class actions through its visible and influential role in the high- profile Cendant litigation.

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