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CalPERS calls Sybase on carpet

The public pension plan calls on Sybase stockholders to push the company to improve its governance practices.

"Shareholders unite." That is the message that the California Public Employees' Retirement System (CalPERS) sent to Sybase shareholders today, in an effort to improve board accountability and the company's stock performance.

Sybase's financial performance has lagged compared with its peers, and its stock is trading near a five-year low. As a result, CalPERS has called on Sybase stockholders to push the company to improve its corporate governance practices.

In an "urgent message from CalPERS," the pension fund called on stockholders to vote in favor of item No. 5 of the annual proxy statement dated April 15, 1998, a shareholder proposal recommending that the company amend its bylaws so that all members of its board of directors will be subjected to annual elections.

The current structure permits stockholders to annually review corporate decision-making and changeover about one-third of the board of directors every three years.

CalPERS said that declassification of the board would promote accountability, arguing that accountability is directly correlated to financial performance.

"Annual reelection insures accountability of a board," CalPERS spokesman Brad Pacheco said, explaining that the board can't be held accountable when there are staggered terms and shareholders cannot vote on the entire board at the same time. "Really, that promotes improper decision-making, because you have boards that are making decisions, but we can't register a vote against the entire board."

Sybase's board disagrees. It said--in the company's annual proxy statement--that accountability depends on "responsible and experienced individuals diligently fulfilling their obligations to the stockholders, not on whether they serve terms of one year or three."

The company maintained that its current system permits changes in the board while avoiding "the potential for sudden and disruptive changes in corporate business strategy and policies that could arise if an entirely new group of directors were elected in a single year," the proxy said.

Sybase's board of directors has recommended a vote against the proposal.

But even if the proposal is approved, it would only serve as a recommendation to the board to take the necessary steps to end the staggered system, not as a mandate.

CalPERS has been targeting Sybase for two years, and has met with company executives on a couple of occasions. The pension fund said that Sybase has been reluctant to change any of its ways.

"We have to turn to shareholder proposals because we can't get any change through conversations with the company," Pacheco said.

Sybase could not be reached for additional comment.

The database software maker continues to trail its competitors in stock performance.

According to the company's proxy statement, $100 invested in Sybase stock on December 31, 1992, would be worth only $54 as of December 31, 1997, while the same $100 invested in the S&P 500 would have appreciated to $253 during the same five-year period. The same $100 invested in the Hambrecht & Quist Technology index would have grown to $307, the proxy said.

CalPERS also has criticized Sybase's board for what it perceives as a lack of personal vested interest in the company.

Four of nine sitting directors have not invested any of their own money in purchasing Sybase shares outright, a fact that CalPERS said indicates that the directors' interests may not be aligned with those of shareholders.

"If they don't have a vested interest, do they really believe in what they are doing?" asked Pacheco. "We are the patient capital, and some of the board hasn't invested a dime."

CalPERS owns more than 423,000 shares of Sybase stock, valued at about $3.7 million.

The largest public pension plan nationwide, with over $140 billion in assets, CalPERS is the beneficial owner of 423,300 shares of Sybase stock, and has been a shareholder for more than five years, said a spokesman. The Sybase proxy said that CalPERS owns about 413,000 shares.

Sybase's annual meeting will be held on May 27.