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February 08, 2010
TIAA-CREF Calls on Shareowners to Take More Active Roles in Corporate Governance
    by Robert Kropp

Referring to crises in governance from Enron to the financial crisis, the financial services organization recommends that institutional investors meet their responsibilities as universal owners through active engagement with companies in their portfolios.

In response to the crises in corporate governance that spanned the last decade, the Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), a financial services organization with $400 billion in assets under management, issued recently a policy brief calling on institutional shareowners to take a more active role in corporate governance.

In its policy brief, TIAA-CREF refers to institutional investors as universal owners, meaning those whose investments are held for the long term, and in many cases are diverse enough to reflect a cross-section of the economy.

The brief reflects TIAA-CREF’s policy of engagement with companies on issues of corporate governance, calling for vigilance in the monitoring by investors of long-term performance, dialogue rather than divestiture as the preferred means of protecting and enhancing the value of holdings, and an emphasis by legislators and regulators on the role of shareowners.

The brief recommends that shareowners diligently vote their shares and dedicate sufficient resources to proxy decisions; show a willingness to hold boards of directors accountable by removing them “when they have performed badly or have been unresponsive to less aggressive overtures such as high votes against compensation programs or other management initiatives;” and ensure that executive compensation is aligned with performance and a realistic assessment of risk.

Shareowners should also act to defend the integrity of accounting standards in corporate financial reporting, encourage a long-term orientation by the generation of policies for sustainable growth, and hold themselves to high standards of governance in their own operations.

In the brief, TIAA-CREF makes reference to its Policy Statement on Corporate Governance, which seeks to “ensure board and management accountability, sustain a culture of integrity, contribute to the strength and continuity of corporate leadership and promote the long-term growth and profitability of the business enterprise,” as well as “safeguard our rights as shareholders and provide an active and vigilant line of defense against fraud, breaches of integrity and abuses of authority.”

TIAA-CREF gained significant attention late last year when it divested its holdings in four of the five major Asian state-owned oil companies with significant operations in Sudan, where the government has used its oil revenues to finance its program of genocide in Darfur.

Also in 2009, TIAA-CREF became a signatory to the United Nations-endorsed Principles for Responsible Investment (PRI), stating in a March 26th letter, “We believe that adherence to governing practices and respect for the rule of law, human rights, and the environment by companies in which we invest is consistent with our fiduciary obligation to safeguard the assets that clients entrust to us.”


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