Financial Daily from THE HINDU group of publications
Sunday, Jun 13, 2004
Financial Daily from THE HINDU group of publications Sunday, Jun 13, 2004 |
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Foreign Institutional Investors Markets - Stock Markets Investing in Indian equity market — CalPERS to be guided by corporate governance Veena Venugopal
Mumbai , June 12 ALTHOUGH California Public Employees Retirement System (CalPERS) had announced its interest in investing in the Indian capital markets earlier this year, its activism on adherence to corporate governance standards indicates that the Indian investments would be restricted to stocks of very few companies. CalPERS has been on a warpath with many of the companies it invests in, regarding practices, which it believes are against sound corporate governance. Confirming that this would be a serious consideration for investing in Indian equities, a CalPERS spokesperson told Business Line, "CalPERS takes corporate governance into consideration as one of many factors when deciding whether to invest in a particular country's equity market." In American companies that CalPERS invests in, it has a three-pronged strategy - promoting effective shareholder participation in selection of management-nominated directors; proxy reform, especially for confidentiality in collection, independence in tabulation and uniformity in the treatment of abstentions and non-votes; and setting meaningful criteria for director qualifications, to be adopted publicly by the board of each company. The initial investment by the company in Indian markets may be too small for it to get involved in corporate activism. CalPERS' allocation of funds to emerging markets is expected to be $2 billion. "Our international investments are managed by external managers who have full discretion on the amount they invest in India; so there is not a set allocation. The managers' performance is a measure against an international benchmark in which the countries are weighted according to market capitalisation," a CalPERS spokesperson said. Although the announcement of CalPERS' decision to invest in India was made in April 2004, the company is yet to complete the registration formalities. "We are currently in the process of meeting the requirements of the Indian Government for investing in publicly traded equities in India," the spokesperson said. Recently, CalPERS demanded the resignation of Mr Richard Grasso, Chariman, New York Stock Exchange, on the basis of his $30-million pay package and substantial retirement benefits. Similarly, CalPERS had voiced concern about Mr Michael Eisner, Chairman and Chief Executive, Walt Disney, before he was stripped of his chairmanship. Currently, CalPERS is voting against the re-election of directors of companies whose auditors also provide non-audit consultancy services. If the company's interest in the Indian bourses continues to grow and there is greater allocation of funds, CalPERS can be expected to make sweeping changes in corporate governance norms here as well.
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