The California Public Employees' Retirement System (CalPERS) will this year target 11 companies due to "dismal stock performance" and "poor governance practices," fund officials announced March 15.

Firms on CalPERS' 2007 "focus list" include Sara Lee, Eli Lilly, Tribune Company, Marsh & McLennan, International Paper, Tenet Healthcare, EMC, Dollar Tree Stores, Corinthian Colleges, Kellwood, and Sanmina-SCI. The fund targeted just six companies last year, and five in 2005.

"The longer-term performance of all 11 companies is at least 20 percent behind their peers, and they have resisted appeals to change corporate practices that make their boards unresponsive to shareowner interests," Rob Feckner, CalPERS' board president, said in a statement on this year's targets. "In several cases, their entrenched boards refuse to discuss our grievances."

The pension fund giant's perennial "focus list" is culled from its investments in its largest equity portfolio--the CalPERS 2500 Index Fund, and is based on the companies' long-term stock performance, corporate governance practices, and an economic value-added evaluation, which measures a company's net operating profit after tax, minus its cost of capital. Fund officials say they have pinpointed companies where poor market performance is due to underlying financial performance problems, as opposed to industry or extraneous factors.

CalPERS said it targeted Sara Lee and Eli Lilly because the companies require a supermajority vote to amend the bylaws. Fund officials say they will file a shareholder proposal at Lilly to reduce the threshold to a simple majority. Similarly, CalPERS will file proposals at Dollar Tree and insurer Marsh & McLennan to address supermajority-voting rules for bylaw changes as well as "excessive" severance pay agreements.

Kellwood, a St. Louis-based apparel marketer; Corinthian Colleges; International Paper; and media giant Tribune Company have classified boards and other "objectionable governance practices," CalPERS representatives say. Meanwhile, International Paper has failed to declassify its board after 79 percent of shareowners voted in favor of that change at last year's annual meeting,

The pension fund is targeting Tenet Healthcare over its failure to remove supermajority voting requirements for articles of incorporation, while electronics contract manufacturer Sanmina-SCI would not agree to adopt a "clawback" policy to recapture bonus and incentives payments in the event of officer fraud or misconduct. EMC, a Massachusetts-based data storage company, has resisted efforts to change "excessive" pay practices, fund officials say.

"Unless these companies make changes, we’ll pursue shareowner proposals to address our concerns," Charles P. Valdes, CalPERS' investment committee chair, said in a statement. "The outcome depends on our dialogue with them as we try to improve their stock performance, shareowner rights, and executive compensation and severance policies."