TIAA-CREF, CalPERS Aim at Corporate Director Pay

According to a Financial Times story, teachers retirement fund TIAA-CREF is preparing a corporate governance hit list of 50 companies which run over-generous executive pay schemes.

Helping draw up the list are two former chief executive officers (CEO)   Ken West of Harris Bankcorp, of Chicago, and Dolph Bridgewater of Brown Shoe Co, of St Louis, the newspaper reported.

Meanwhile, CalPERS, the giant $150-billion Californian fund, also plans a campaign on pay, the Financial Times said.

According to the Financial Times, TIAA-CREF will present boards with proposed pay schemes and, if these are rejected, will file shareholder resolutions against the companies.

The proposed pay plans would, involve three common themes. They include that the stock and stock options:

• would have to be performance-related
• would have extended holding periods
• would contain an element of downside risk.

TIAA-CREF will also seek to clamp down on abuses of the executive pay system – including the practice of chief executives hedging any risk in their stock options.

The campaign represents a significant hardening of the teacher fund’s position ahead of the annual voting season, which could develop into one of the most confrontational ever, the Financial Times said. The wave of corporate scandals is likely to generate a highly charged atmosphere at the next round of shareholder meetings, the newspaper said.

Peter Clapman, chief investment counsel for TIAA-CREF, told the Financial Times: “We are going to speak to the CEOs of these companies and get real tough with these people.”

TIAA-CREF is also targeting companies’ auditing practices and will be pressing for companies to rotate their auditors.