March 20, 2007
TIAA-CREF Ups the Ante With New Stance on ESG Issues
by Anne Moore Odell
TIAA-CREF’s new policy statement and proxy voting guidelines address social, environmental and
governance issues, moving SRI arguments into the mainstream.
TIAA-CREF, one of the world’s largest
providers of retirement services, serving the academic, medical, research and cultural fields,
recently released its "Policy Statement on Corporate
Governance.” This new policy reads like a manual for socially responsible investing as it
updates the financial leader’s stance on many issues important to socially responsible investors.
Since this policy acts as a guide for TIAA-CREF's investment managers, portfolio companies would do
well to note the trail it blazes. With $406 billion invested worldwide, TIAA-CREF cuts a wide path.
TIAA-CREF’s trustees, management, and corporate governance group created the new
policy statement after more than a year of study. The guidelines are intended to inform TIAA-CREF’s
portfolio companies, participants, regulators, advocacy groups, and other institutional investors
on their positions. These newest guidelines put social and environmental issues on par with
corporate governance issues, breaking new ground for TIAA-CREF.
The 40 page booklet
publishes TIAA-CREF’s philosophy on many social, environmental and governance (ESG) issues and
includes an appendix that outlines proxy voting guidelines. This fifth edition of TIAA-CREF’s
policy statement puts its new guidelines in the context of its active history of corporate
Hye-Won Choi, Vice-President of Corporate Governance for TIAA-CREF told
Socialfunds.com, “We seek to take a balanced approach, asserting our rights as shareholders, but
not micromanaging, and letting boards exercise business judgment in the affairs of the
Over thirty years ago, TIAA-CREF was one of the first institutional
investors to work with companies on corporate governance issues. This work extended into the 1990s
when it worked on, among other things, board diversity and shareholder rights. At the same time,
the organization also paid attention to social concerns. In 1990 it created the TIAA-CREF Social
Choice Account, which now uses the KLD Broad Market Social Index as its screening benchmark.
“Many of us believe TIAA-CREF’s positions and opinions help set trends,” said Tim Smith of Walden Asset Management. “Certainly
their Policy Statement completely breaks down the ‘silos’ some pension funds have created where
corporate governance is seen as separate and sometimes more important than social and environmental
TIAA-CREF holds stock in many domestic and global companies and its first choice
is private engagement with the companies it invests with. However, it also engages with companies
using a variety of methods: filing shareholder resolutions, by voting against directors, public
dialogue, collective action with other investors, and by seeking regulatory and legislative relief.
It would rather engage with companies than divest.
For example, TIAA-CREF engaged with ten
of its largest companies in Delaware, asking them to adopt bylaw amendments requiring majority
voting. These companies were selected based on a number of factors, including the level of
TIAA-CREF’s holdings in the company and their governance profile. After private discussions,
TIAA-CREF was able to persuade all ten of the companies to adopt majority voting. It is
TIAA-CREF’s policy not to name the companies and let them take credit for taking these steps
One of the lenses through which TIAA-CREF crafts its policies is as a
long-term investor. An area where this view is especially important is executive pay. It would vote
against resolutions that impose arbitrary ratios or pay-caps on executive pay.
we will make our voting decisions on a case-by-case basis, we will generally support shareholder
proposals seeking an advisory vote on compensation disclosure and proposals seeking access to the
corporate ballot if we believe that the conditions and procedures are reasonable and will not be
unduly disruptive to the company,” Choi stated.
TIAA-CREF approaches the impact of
environmental and social responsibility issues from the viewpoint of shareholder value. The policy
reads: “There is a growing body of research examining the economic consequences of companies’
efforts to promote good environmental and social practices. We support companies’ efforts to
evaluate the strategic relevance of these factors, including their impact on business risk,
reputation, competitive position and opportunities for growth.”
According to Choi,
TIAA-CREF’s approach to social and environmental issues “is that they should be treated by boards
in the same manner as governance issues. We don't want to micromanage, but we want to be sure that
boards of directors are giving consideration to CSR issues, analyzing the strategic and economic
questions they raise for companies, and disclosing their policies and practices fully to
shareholders,” she told Socialfunds.com. “The burden is on boards of directors to convince
shareholders that they have considered these issues from the perspective of shareholder returns and
reduction of risk,” she added.
The policy asks companies to address the following issues:
the environment, human rights, diversity, product responsibility, and society. It also includes
guidelines for some common environmental and social resolutions. TIAA-CREF generally supports
resolutions that seek reasonable disclosure on the social and/or environmental impact of a company.
“People in the SRI field are applauding the TIAA-CREF’s new guidelines,” Smith told
Socialfunds.com. “TIAA-CREF states clearly that environmental, social and governance issues all
have an impact on long term shareowner value and therefore it is their fiduciary responsibility to
be assessing company performance in these areas. They also urge company boards and management to
seek to excel in these areas.”
“TIAA-CREF's updated policy is a mirror image of the
transformation occurring in many pension funds who are active voices on issues like executive pay
and climate change,” Smith added.