Why Corporate Governance Matters: Governance, Trust and Integrity

Hello, I'm Harry Keiley, Chair of the Teachers' Retirement Board for the California State Teachers' Retirement System. As fiduciaries for California’s teachers, we’re committed to the proposition that better corporate
governance leads to greater long-term value. With recent allegations of corporate misconduct, fraud and bribery, corporate accountability is a high profile issue. In May of 2012 the Teachers’ Retirement Board
embarked on an unprecedented legal action in the area of corporate governance. CalSTRS initiated a derivative action lawsuit against executives and board members of the world’s largest retailer … Wal-Mart. A derivative action is where the suing shareholder … in this
case CalSTRS … acts on behalf of the corporation. CalSTRS brought this action because it believes Walmart’s directors and management failed to carry out their fiduciary duties for the
benefit of the company and its shareholders. CalSTRS understands that top Wal-Mart officials were aware of an internal investigation confirming bribery of Mexican officials and instead of talking action, undercut the investigation. This breakdown in corporate governance has now exposed Wal-Mart
to regulatory action and federal investigations. Concerned investors like CalSTRS want assurance that governance safeguards are put in place to mitigate risk. CalSTRS is the nation’s largest teacher pension fund and the
11th largest public pension fund in the world. We believe our fiduciary duty includes our responsibility as an
active shareholder to advance the highest ethical standards. CalSTRS recognizes that long-term value creation through better corporate governance is significant to producing better returns. Owning a share in a company is not the end of a shareholder’s influence rather it’s the beginning of an on-going dialogue between investors and a company. Rigorous board oversight of risk management ensures a company
is protecting corporate governance and trust appropriately. Here at CalSTRS, we believe that truly independent leadership, who
will set the right tone from the top, is no longer an option, but a necessary component of corporate responsibility.

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