Fund giant TIAA-CREF imposes ‘say on pay’ on itself as tool spreads

In a striking case of an investor taking its own medicine, TIAA-CREF today became the first fund company in North America voluntarily to grant its own savers an annual non-binding vote on executive compensation policies. TIAA-CREF has been among big US funds prescribing that corporations embrace ‘say on pay,’ a practice already required in Britain, Australia, the Netherlands, Sweden and Norway. Expect this latest move to accelerate efforts to install advisory votes in the US just as related drives get underway in France and Canada.

A proxy dispatched to some three million TIAA policyholders asks for a confidence vote on executive pay. [CREF members can’t have a comparable vote because managers are all on TIAA’s payroll.] Results are due after July 17. TIAA is also inviting policyholders to post comments on the firm’s pay policies online. The bold initiative comes one week after a study named TIAA-CREF, a combined mutual fund and insurance company, the top-ranked money manager for actions to tie public company CEO pay to performance. Failed Fiduciaries, issued by AFSCME, tagged AllianceBernstein as worst.

So far, Aflac is the only firm in North America to adopt ‘say on pay.’ But a joint corporate-investor working group has just announced a July 19 workshop at Pfizer offices in New York to air the issue—and possibly pave the way for more companies to follow. TIAA-CREF’s ‘own medicine’ move may spur other funds to do the same.

Nicolas Sarkozy, France’s new president, is taking ‘say on pay’ a step further. This week he promised “ethical capitalism” legislation giving shareowners a binding vote on corporate incentive pay schemes. Boards would have to craft plans according to a simple rule: “No performance, no bonus,” Sarkozy told Le Figaro.

‘Say on pay’ is emerging in Canada, too. Two weeks ago Ontario New Democratic legislator Michael Prue filed a bill unsubtly titled The Conrad Black Executive Compensation Abuse Act, which would require binding votes on executive compensation packages. Meritas Mutual Funds may file shareowner resolutions in 2008 asking corporates to adopt advisory votes on pay. And SHARE, the Vancouver-based trade union-backed group, now supports the idea. The influential Canadian Coalition for Good Governance has taken no position on the pay vote as yet, but says it is watching developments closely. 􀂆

 

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