Oregon as a Responsible Shareholder
The Oregon Investment Council ("OIC") oversees one of the largest pension funds in the country, and invests in companies around the globe.
The Oregon Investment Council and Oregon State Treasurer Ted Wheeler, who sits on the Council, are taking action to encourage better corporate governance.
Actions as a public equity shareholder
As a holder of public equities such as stocks, Oregon acts as a responsible shareholder on behalf of public workers and other beneficiaries of publicly managed assets, including children who rely on the Common School Fund. The dollars invested do not belong to Oregon or the Legislature: The funds are held in trust and managed for tens of thousands of beneficiaries.
The potential returns on those investments can be hurt by many factors including inadequate regulations; limitations of investment options based on social causes or geography; and corporate management that does not prioritize the best interests of shareholders
As a shareholder, Oregon can be influential in shaping how corporations and their boards of directors operate - and there's good reason to do so. Public investments will benefit because of improved corporate responsibility, and because of better accountability and transparency of financial markets.
A commitment to transparency and accountability reduces the risks for all investors, because they know what is happening on -- and also behind -- corporate balance sheets.
The Treasury also monitors the evolving international marketplace to further the Oregon Legislature's goal to divest from investments in Sudan, while also adhering to state fiduciary obligations.
The Treasury's efforts fall into general categories:
Better corporate management
Advocating for more shareholder access and say with regard to boards of directors, encouraging more transparency and accountability, and demanding more say on CEO compensation.
Engaging state and federal oversight agencies and Congress to strengthen regulations that protect shareholders and the public.
Encouraging responsible practices
Promoting the use of green energy, seeking disclosure of climate related-risks and targeting offshore tax havens.
Actions as a private equity investor
Private equity is a class of investments in which partnerships and companies purchase and own privately owned companies. That means those companies are not traded on a stock exchange.
Because those investments are in private entities and real estate, they do not fall under the same reporting rules for publicly owned companies. The OIC has encouraged a set of responsible practices for private equity partnerships and businesses it partly owns through private equity funds. You can read the principles here.
The Oregon Investment Council also supports in principle a similar effort by the Institutional Limited Partners Association to create a set of Private Equity Principles.
The Principles have been signed by a group of 130 institutional investors, and are intended to establish best practices for a strong and sustainable asset class.
Keeping the public informed
Efforts are outlined in the Oregon State Treasury annual report, and through news releases. You can learn more here about the Oregon Treasury's actions to encourage better corporate governance and to improve financial markets.
Like all investors, the state of Oregon has the ability to press for positive changes in how corporations are run. The chief avenue for that advocacy is through proxy elections at annual meetings of shareholders.
An independent firm is under contract to cast Oregon's proxy votes at annual meetings and to provide independent information and research about the governance and actions of public companies, both domestic and foreign.
Proxy votes are made with an eye toward improving the policies of corporate leadership and promoting transparency and accountability at companies in which Oregon invests.
When actions by corporations damage the value of Oregon funds and undermine Oregonians who rely on the funds, the Office of the State Treasurer can initiate legal action to both recoup losses and also influence future executive-level decisionmaking.
In recent years, the State Treasury sought legal recourse against OppenheimerFunds, Swiss bank UBS and Countrywide to recoup losses that were directly attributable to improper corporate behavior, such as failing to properly notify investors of fund changes.
Advocating For Reform
The State Treasurer takes an active role in encouraging lawmakers to protect consumers and appropriately regulate the financial sector.
Oregon also advocates for strong regulations at the federal level through its membership in national organizations. The Treasurer is a member of the National Association of State Treasurers, which interacts with Congress and federal agencies on behalf state financial officers.
The state is also a member of the Council of Institutional Investors, a non-profit investor group representing pension funds with combined assets that exceed $7 trillion dollars. All member funds are major long-term shareowners with a duty to protect the retirement assets of millions of American workers.
Sudan Investment Policy
In 2005, the Legislative assembly passed Senate Bill 1089-A, which limits the State Treasury and the Oregon Investment Council with respect to businesses with operations in Sudan.
In addition, the State Treasury continually monitors the international marketplace in cooperation with external equity managers. If a company in which Oregon invests begins doing business in Sudan, the statute requires that the Treasury engage with the company and, if necessary, divest its holdings. The statute requires that divestment can only occur when there is no monetary loss to the public funds under treasury management.
Annual reports are compiled for the Legislature about the policy.
The way a corporation directs and controls itself. Good corporate governance is a system of checks and balances that fosters transparency, responsibility, accountability and market integrity. Better corporate governance practices lead to better returns for shareholders.
Common stock shareholders have the power through voting rights to influence the management of a corporation. Actively exercising these rights is an effective way to enhance portfolio value. Not exercising these rights ignores a valuable ownership right that could be managed for the benefit of the portfolio. Shareholders can group together and vote as a bloc. The Oregon Investment Council set goals and guidelines for proxy voting.
The Council for Institutional Investors:
The OIC is a member of the Council of Institutional Investors, a non-profit investor group representing pension funds with combined assets that exceed $7 trillion dollars. All member funds are major long-term shareowners with a duty to protect the retirement assets of millions of American workers. Involvement with the Council of Institutional Investors places the Oregon Investment Council on the forefront of corporate governance issues and enables it to better protect its investments, and the pension fund. As a shareholder, the OIC can be influential in shaping good practices for corporate governance.