In the world of heavyweight institutional investors, the California Public Employees' Retirement System, or Calpers, is a 500-pound gorilla. And on Monday it leaned on Citigroup's board, citing corporate governance problems at the company, the world's biggest bank, as reasons for not supporting the re-election of Sanford I. Weill and Charles O. Prince as directors next week.
Yesterday, another hefty Citigroup investor, the New York State Common Retirement Fund, said it also planned to withhold votes for Mr. Weill and Mr. Prince, saying in a statement that "their status as company insiders raises questions about the independence and objectivity of Citigroup's board of directors."
Mr. Weill, Citigroup's well-compensated chairman, and Mr. Prince, who pulls down his own handsome pay package as the chief executive, have drawn scrutiny previously for their stewardship of the bank, but Calpers' emergence as a corporate critic may attract other dissidents as well.
"Calpers is a bellwether institution among pension funds, and everyone tends to follow their lead because of their size and visibility," said Conrad Ciccotello, a business professor at Georgia State University. "Any rational decision maker, including Sandy Weill, has to take into account the reputational issues at stake."
Calpers has responsibility for a total of $164 billion in assets and controls 26.7 million shares of Citigroup, a substantial stake that nevertheless pales in comparison with the holdings of institutions like the State Street Corporation, Barclays Bank and Fidelity Investments, which each control more than 200 million Citigroup shares. Citigroup has about five billion shares outstanding, making it difficult for any single shareholder, no matter how large, to agitate successfully against the bank.
The New York State fund's decision to withhold its Citigroup votes adds muscle to the Calpers push. The New York State pension fund manages about $118 billion in assets and owns 22.4 million Citigroup shares.