By James McNair
The Cincinnati Enquirer

Cincinnati Financial Corp. has taken steps to give a majority of its 15 board seats to independent directors. The move comes nearly two years after the country's biggest pension fund criticized the board's domination by company executives and insurance agents who sell the company's products.

The Fairfield-based insurance company said Monday that two of the insurance agents on its board, John Field of Springfield and Alan Weiler of Columbus, have reached the company's age ceiling and won't be re-elected. Nominated to fill their spots were Dirk Debbink, president of the construction company MSI General Corp. in Oconomowoc, Wis., and Douglas Skidmore, president of Skidmore Sales & Distributing Co., a food distributor in West Chester.

Cincinnati Financial said the moves will help it comply with tougher federal regulations and stock market rules requiring that independent directors constitute a majority of the boards of publicly traded companies.

They will also likely appease one of its institutional shareholders, the California Public Employees' Retirement System.

The pension fund, which holds 747,874 Cincinnati Financial shares, introduced a shareholder resolution in 2002 calling for a majority of the company's board seats to be held by independent directors. Noting that only a third of the Cincinnati Financial directors had no employment or business ties to the company, it lumped the insurer onto its annual list of the five worst examples of corporate governance.

The measure was defeated. Since then, however, the federal Sarbanes-Oxley Act of 2002 and changes in stock market regulations have prompted publicly traded corporations to cede more board control to independent directors. Monday's appointments, if approved by Cincinnati Financial shareholders at their April 24 annual meeting, will give independent directors eight of the company's 15 board seats.

"It sounds like a positive move," said Brad Pacheco, spokesman for the pension fund, whose shares represent less than half of 1 percent of Cincinnati Financial's outstanding shares.

"We're seeing less and less of the boards where it's apparent that independence is a problem," he said. "A lot of these companies we've dealt with in the past are coming into compliance."

A Cincinnati Financial spokeswoman said neither of its new nominees for director has financial ties with the company that would represent a breach of independence under the Nasdaq Stock Market rules. But she added that Cincinnati Financial insures both of their companies.

Cincinnati Financial's board took three other corporate governance actions Monday. It adopted new guidelines for its compensation and nominating committees, amended the charter for its audit committee and adopted a code of ethics for the company's senior financial officers.

E-mail jmcnair@enquirer.com