PEORIA — An investment group tied to pension funds with substantial investments in Caterpillar Inc. is calling on the incoming chairman of the company’s board of directors to implement vast new oversight measures.
A letter issued Thursday by CtW Investment Group to David Calhoun, who takes over as chairman from Doug Oberhelman on April 1, asks the company to establish a special committee of independent directors to review Caterpillar’s tax strategy before the company’s annual shareholders meeting in June.
The letter additionally requests that Caterpillar replace PricewaterhouseCoopers as the company’s external auditor — a role the accounting firm has held for more than 80 years — because of a potential conflict of interest as both the developer of a controversial tax strategy for Caterpillar and the auditor tasked with evaluating its legality.
The investment group’s suggestions come in the wake of wide-ranging federal inquiries, including a U.S. Senate investigation, into Caterpillar’s tax strategy that appear connected to search warrants executed at the company headquarters last week.
“(T)hese mounting allegations regarding the company’s tax strategy suggest, at a minimum, a lack of aggressive board oversight that has resulted in significant reputational costs to the company for which the board does not appear to have made timely or appropriate remedies,” CtW Investment Group Executive Director Dieter Waizenegger wrote in the letter.
The group specifically wants Caterpillar to establish a “special committee of independent directors not currently or previously involved in approving the company’s tax strategy to investigate, evaluate, and disclose changes to reduce noncompliance and risks related to the company’s tax scheme.”
CtW Investment Group has previously petitioned the company to change executive compensation arrangements to make top officers at Caterpillar more accountable and has authored a current shareholder proposal to fortify the company’s claw-back policy. That initiative would give the company more latitude to retract executive pay in instances of misconduct, as reiterated in Thursday’s letter.
“Documentation uncovered during the Senate investigation show executives were well aware of the risks associated with the tax scheme, but nonetheless agreed to the arrangement, improperly reporting profits and enriching themselves in the process through their equity compensation awards,” Waizenegger wrote.
The letter continued: “Given the reputational cost to the company as a result of its tax strategy and potential misconduct by Company executives, the board should take immediate action to strengthen executive pay accountability by adopting the changes to the company’s claw-back policy, as outlined in our shareholder proposal.”