In October 1999, the New York Supreme Court approved a settlement of a shareowner's lawsuit against the former officers and directors of W.R. Grace & Co. (Grace).

The settlement recovered nearly $4 million of shareowners dollars that were part of a severance package that was alleged to have been improperly paid to J.P. Bolduc, former CEO of W.R. Grace. Additionally, W.R. Grace agreed to adopt a strong policy on sexual harassment which CalPERS believes can be a model for corporate sexual harassment policies throughout the country.

The settlement was a clear victory for CalPERS and shareowners of W.R. Grace.

In March of 1995, Grace directors awarded Bolduc approximately $20 million in severance benefits, consisting of the repurchase of shares and various cash payments, when he resigned as president and CEO. The severance package was bestowed upon Bolduc even though his employment agreement, in effect at the time of his resignation, reportedly did not require or provide for such payment. A March 30, 1995 New York Times article reported that Bolduc "resigned" under pressure because of allegations of sexual harassment against him by at least five Grace employees.

In 1996, CalPERS intervened in an existing shareowner lawsuit against Grace and was later named lead plaintiff in the case. In papers filed in the Supreme Court of the State of New York, the pension fund alleged that an agreement to pay enormous severance payments to Bolduc was a breach of fiduciary duty by the board members and a waste of the company's assets.

Prior to the pension fund's intervention, a settlement had been proposed that would have returned no money to the corporation, and would have required the adoption of a sexual harassment policy that CalPERS believed was seriously inadequate. After CalPERS intervention, Grace adopted a number of corporate governance reforms, including the appointment of independent outside directors to serve on the company's Audit, Compensation and Nominating committees.

At the time of the settlement, CalPERS owned approximately 1.3 million shares of W.R. Grace common stock.