SEAN HARRIGAN has a talent for making powerful enemies. Warren Buffett, the leading investor, Michael Eisner, Disney’s boss, Sanford Weill, Citigroup chairman, and Richard Grasso, former chief of the New York Stock Exchange, are just a few of the great and the good who are unlikely to send him a Christmas card.

Last week he was ousted from his job as head of the California Public Employees’ Retirement System, known as Calpers, the world’s largest pension fund. He may have fallen victim to another powerful enemy: Arnold Schwarzenegger, Hollywood action man turned California governor. Friend and foe alike said that Harrigan’s departure signalled a sea change in the business community.

Since the wave of scandals that followed Enron’s collapse, business has been on the back foot. Now it is on the offensive.

Harrigan’s departure was immediately cheered by the Chamber of Commerce in Washington. In a statement, the chamber said it hoped “the change would lead to broader reforms at Calpers and other public pension boards across the country”.

On Friday in Los Angeles frantic efforts were underway to try to reverse the decision. In what would be a stunning move if successful, national union leaders were reportedly lobbying the state legislature to appoint Harrigan to another open seat on the Calpers board.

Harrigan, president of Calpers since February 2003, spearheaded efforts to impose more accountability on business.

Along with fellow American pension giant TIAA-CREF and Hermes, the Post Office pension fund in Britain, Calpers has been instrumental in taking corporate governance out of academe and into the boardroom.

With assets of $165 billion (£86 billion), Calpers has led the fight from the front. Some $34.5 billion of its assets are invested outside America, a large percentage in Britain.

Its ally in shareholder advocacy, the California State Teachers Retirement System, or Calsters, controls another $97 billion of assets. Combined, the two wield $250 billion of investing power.

Calpers’ trustees argue that it is their duty to put managements under pressure because good corporate behaviour is likely to lead to better returns for shareholders. But in recent months Calpers has caused anger even in the corporate- governance community.

Harrigan lost his job in a 3-2 vote. One of the votes to replace Harrigan was provided by a new appointee of Schwarzenegger’s. Replacing him is Ron Alvarado, whose background is more aligned with the private business sector. The business community is hoping for an easier ride from Alvarado.

Harrigan’s predecessors helped to establish corporate governance as a force for change. In the early 1990s, Calpers joined other big investors to help topple the chief executives of American Express, General Motors and IBM because their companies were underperforming.

And in 1995, Calpers was the prime mover in setting up the International Corporate Governance Network, whose institutional members control assets of more than $10,000 billion.