Oregon State Treasury

Tobias Read OREGON STATE TREASURER

Corporate Responsibility

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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 Tobias Read, who sits on the Council, are taking action to encourage better corporate governance.

In accordance with policies adopted by the Oregon Investment Council, the Oregon State Treasury manages a multibillion-dollar investment portfolio to maximize long-term returnson behalf of Oregon public fund beneficiaries including schoolchildren, injured workers and public workers and retirees.

To achieve that imperative, Treasury monitors and manages risks as a prudent global investor, and bases investment decisions on empirical data.

Among factors that impact the sustainability of the Oregon portfolio: the way companies are governed on behalf of shareholders for long-term success, and the effectiveness of financial regulations to ensure transparency and accountability in the financial marketplace.

Guiding “investment beliefs” adopted by the OIC recognize these factors: 

7. TRANSPARENT CAPITAL MARKETS ARE ESSENTIAL FOR THE LONGTERM SUCCESS OF OIC/OST INVESTMENT ACTIVITIES

  • The OIC recognizes that the quality of regulation and corporate governance can affect the long-term value of its investments.
  • The Council promotes open, competitive market structures to ensure accurate and timely price discovery/asset valuation.
  • The OIC also recognizes that voting rights have economic value and therefore must be treated as a fund or beneficiary asset.
  • The OIC shall vote shares in its capacity as fiduciary and based solely on the      economic merits of specific proxy proposals.

Treasury’s Corporate Governance program is responsible for managing these efforts articulated by the OIC.

While the Oregon public trust fund portfolio is the direct beneficiary of Treasury advocacy to improve governance and financial markets, an increase in investor-friendly regulations such as better transparency of climate-related risks and opportunities will assist every Oregonian who relies on or is exposed to financial markets. In addition, the public benefits from improved understanding.   

Accountability and transparency

Corporate governance is defined as 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. For instance, research shows that companies with more diversity on boards of directors tend to outperform those that do not.

The Oregon Treasury’s efforts pursue the broad goals of improving corporate accountability and transparency to shareholders, protecting the integrity of financial markets, managing proxy voting at company annual meetings, and pushing for better Environmental, Social and Governance (ESG) practices, to increase the likelihood of sustainable investment returns. 

In addition, the Oregon Treasury is participating in an international effort to improve and standardize the empirical reporting of ESG and associated risk factors, in order to help investors including Oregon to make better and more informed decisions.

Oregon prioritizes good corporate governance and ESG factors across the entire portfolio, in both private and public investments. As a responsible shareholder of public companies, Oregon can be influential in shaping how corporations and their boards of directors operate. Oregon engages with companies directly and also via collaboration with other investors through organizations such as the Council of Institutional Investors and Ceres. With private market investments, Oregon presses for better transparency and governance through participation with organizations such as the Institutional Limited Partner Association.

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 recoup losses, influence future executive-level decisionmaking, and raise public attention. The Corporate Governance program oversees the securities litigation program in conjunction with the Oregon Department of Justice, and has successfully obtained millions on behalf of beneficiaries. 

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.
 
You can learn more about those at www.ilpa.org

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.
   

Proxy Voting

 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.
  

Legal Action

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 effective financial regulations 

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.
  


 
 

Corporate Governance:

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.

Proxy Voting:

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.
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