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March 20, 2000
TIAA-CREF Raises the Bar on Corporate Governance Principles
The pension giant takes an authoritative stand on executive compensation, anti-takeover defenses,
and other governance issues.
SocialFunds.com --
The prevailing pension system for educational and research employees, TIAA-CREF, has taken a strong
position on how companies in their portfolio are governed since their 1994 Policy Statement on
Corporate Governance. The most recent edition of the Statement announced last week breaks
additional new ground, reflecting changes in corporate culture and shareholder awareness,
confirming TIAA-CREF as a leader in this area.
 Corporate governance, one of the central
concerns of many social investors is clearly a strength TIAA-CREF brings to all of its products. As
one of the world's largest institutional investors with equity holdings in 4,800 companies,
including most major U.S. corporations, TIAA-CREF has long held the view that it should promote
good corporate governance practices as a way to maximize shareholder value.
TIAA-CREF's
first Policy Statement on Corporate Governance, published in 1994 and circulated to all domestic
portfolio companies, set a strong precedent by asserting governance ideals using the leverage of
$175 billion in equity assets. The most recent substantially revised edition puts greater emphasis
on the governance of executive compensation, and on the role of the Board of Directors and its
Compensation Committees in setting pay.
"We believe that how a company deals with highly
visible executive compensation issues provides a clear indication of how effectively it is handling
overall corporate governance," said Peter Clapman, TIAA-CREF senior vice president and chief
counsel.
"Large compensation awards to executives despite poor company performance,
whether in terms of a declining stock price or other measures, gives shareholders strong reason to
believe that directors are not looking out for their best interests." The Statement outlines five
principles for making executive compensation more accountable, including shareholder approval of
all stock-based compensation and the full independence of the board of directors.
TIAA-CREF's new Statement also includes sharpened views on anti-takeover measures, expressing
the growing shareholder concern about "dead hand" poison pill provisions that prevent acquisition
despite majority shareholder support. This stance is a continuation of TIAA-CREF's aggressive
campaign of shareholder resolutions against unfair poison pill practices, which began last year.
Last year TIAA-CREF filed 11 shareholder resolutions with companies concerning their
anti-takeover defenses, all of which agreed to drop the "dead hand" provision, three of them only
after overwhelming shareholder support. This year resolutions have been filed to 17 companies, and
another 12 companies approached have already agreed to drop the "dead hand" language.
Finally, the TIAA-CREF Statement also discusses corporate governance standards around the
world, the first stand the pension plan has taken on this issue and an important step toward a
global understanding of governance ideals. Corporate governance standards vary widely in other
nations, and can affect the performance of international investments.
TIAA-CREF owns more
than $30 billion in equity investments of 1,500 foreign companies, so it is ideally placed to make
a significant contribution in this area. The Statement expresses its support for principles issued
by the International Corporate Governance Network, a world-wide organization bringing together
investors concerned with global corporate governance issues, including fair voting processes,
accountability, and other concerns.
"We are long-term investors in the companies in which
we invest, and believe that one of the best ways to protect our interests in them is to ensure that
they have good corporate governance structures that hold management accountable," said Tom Pinto,
TIAA-CREF Media Relations Director.
"TIAA-CREF is in a good position to provide
leadership in this area, because of the extent and nature of our equity holdings, and because of
our history of concern on governance issues." With more than $280 billion in management in pension
products, mutual funds, annuities, and trust services, one would be hard-pressed to disagree.
©
SRI World Group, Inc. All Rights Reserved.
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