The Maytag Corporation released a statement questioning its inclusion in CalPERS' (California Public Employees' Retirement System) 2004 Corporate Governance Focus List. The appliance maker claims it does not belong on the list.
This year's annual list includes Maytag among four public companies targeted by CalPERS' for the 2004 proxy season. Maytag voiced its disappointment in CalPERS' decision, given the openness with which it approached the review process. Roger Scholten, Maytag's senior vice president and general counsel, said, "Many of the companies included in CalPERS previous Focus Lists have faced regulatory or judicial scrutiny. Maytag faces no such challenges."
Maytag believes it does not qualify under CalPERS "criteria," which is described on its web site as including the following:
Relative stock price performance
Maytag believes that its performance relative to S & P and peers as well as periodic EVA generation in each of the last six years should alone disqualify Maytag from consideration. As disclosed in CalPERS' fact sheet, Maytag says its 1- and 3-year Total Return Performance was significantly above the S & P 500 Index. By many non-biased evaluators, Maytag also ranks high on corporate governance, the appliance maker said.
Maytag said it has discussed these issues with CalPERS on several occasions. In one day-long meeting at its corporate headquarters, Maytag made available several members of its board and a number of senior members of the management team. The company said it shared public information about its strategies to improve performance and discussed in detail the concerns CalPERS had about a few governance matters.
"CalPERS praised Maytag's policy of linking compensation to financial performance, but included the company on its 2004 Focus List despite the considerable progress made in resolving many of CalPERS' concerns," Mr. Scholten said in a statement.
In addition, Maytag said that in November 2003, ISS (Institutional Shareholder Services), which advises many institutional investors on proxy matters, gave the appliance maker a CGQ (Corporate Governance Quotient) of 96 percent, indicating the company outperformed 96 percent of the companies in the consumer durables and apparel group. That ratio remained unchanged through May 2004.
Maytag said it believes it that it is in the top echelon in terms of corporate governance for the following reasons:
Ten of Maytag's 11 directors are independent. The only insider is Ralph F. Hake, chairman and CEO. All committees except the executive committee consist of independent directors.
Much of the compensation of the CEO and the senior executive group is tied to financial performance metrics. There was no CEO bonus payout for 2003.
The CEO's long-term (3-year) incentive is tied to return on net assets and total shareholder return, resulting in a payout in stock, not cash, for 2001-2003.
More than half of the CEO's stock options are premium-priced. The CEO has aggressive stock ownership guidelines that require personal investment in addition to stock-based compensation awards. Stock options cannot be repriced without shareholder approval.
All directors attended the 2004 annual meeting.
The CEO, senior executives and directors have no loans granted by the company.
Maytag said that CalPERS announced that it would withhold support for re-election of a majority of directors (90 percent in 2004) within its U.S. investments, primarily due to a concern about "conflicts of interest" between directors and auditors. CalPERS elected not to withhold votes for any of Maytag's directors.
This year, all four Maytag directors were elected by at least 77 percent of the shares voting-unchanged from 2003 at 79 percent, the appliance maker said.
"We see no legitimate justification for CalPERS to include the company on its annual Focus List, which in the past has been reserved for companies at the 'bottom of the barrel' on good corporate governance," Mr. Scholten noted.
"In addition, we believe the criteria applied to Maytag was inconsistent with CalPERS claimed principles for evaluation," he continued. "Despite CalPERS' assertions that this is a performance and governance issue, it would appear that CalPERS' decision was based solely on shareholder majority vote issues without evaluating the individual merits and the facts that Maytag presented."
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