TIAA-CREF is hoping to lead the fund industry in a better direction by applying a new set of fund governance principles to its own funds and the funds that it offers from other companies.

The $300 billion behemoth not only calls for support of the SEC proposal requiring an independent chairman and a three-quarters majority of independent board directors, but is advocating an entirely independent board in the future.

TIAA-CREF officials said that it is more critical for funds to have independent directors because unlike other public companies, "there is rarely a large shareholder with effective power to monitor board performance. …shareholders of funds must rely even more on independent directors to protect their interests and to ask the tough questions of advisers."

TIAA-CREF also supports an outright elimination of directed brokerage, regular director elections, clear-cut research costs, and fair dealing.

The principles will apply to all funds offered by the education behemoth.

TIAA-CREF said that it had already taken steps to reform itself, starting in early 2003. Officials appointed an independent chairman for TIAA-CREF and fund boards, adopted non-required accounting, and will hold annual elections and regular board meetings, sans management, for TIAA and CREF boards.

Previously, board members served terms of three years, but the new provision means that every member of the TIAA and CREF boards will be up for re-election on June 15, and every year thereafter, said spokeswoman Stephanie Cohen Glass.

"[The principles] show that we are taking a look in the mirror to make sure we meet the highest standards as well," said Herbert M. Allison Jr., chief executive officer.

The guidelines are "aspirational, we're hoping to move the industry" said spokesman Glen Weiner. Weiner characterized the application of the principles as "not a binary decision." Fund governance will be "one of the factors...we would look at," in addition to cost, value and performance, added Cohen. 

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