UCOP announces pension plan with Japanese government

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On Oct. 21, the UC Office of the President announced it was the first U.S. pension plan and endowment fund to sign the Japan Stewardship Code to foster economic growth through greater involvement on the part of investors.

According to a press release, the code was created by the Japanese government last year to stimulate the country’s economy and was itself modeled after a corporate code instituted in the United Kingdom. It contains a list of seven principles designed to create “constructive dialogue” between corporations and investors.

“Signing the Japan Stewardship Code is an action in line with this broader framework adopted by the Office of the Chief Investment Officer this year, a commitment to environmental sustainability, social responsibility and prudent governance,” said UCOP spokesperson Kate Moser in an email.

By signing the code, the University of California hopes that it can improve future shareholder returns by “promoting better financial stewardship, corporate governance, and investment and dialogue,” according to the press release. The university’s decision to sign the code arose after a visit to Japan by investment professionals from the UC Office of the Chief Investment Officer of the Regents.

According to the press release, the broader sustainability framework that the university is planning on implementing will encourage the university to engage directly with companies it invests in and other organizations “to magnify its voice about the importance of sustainable investing.”

Steven Vogel, campus professor of political science, has been following and researching the Japanese government’s recent economic reforms — including the Japanese Stewardship Code — in recent years and has written a manuscript on the political changes it may bring. Vogel describes the code as an agreement by investors on specific obligations. By signing the code, institutional investors are agreeing to a more active relationship in corporate management rather than a passive stance limited to buying and selling stock.

One of the main purposes of the code is to encourage institutional investors to behave responsibly in fulfilling their stewardship duties, according to the code’s language.

According to Vogel, because the code is a nonbinding agreement, the effect it will actually have on international trade relations is questionable.

“Companies can say that they support it even if they are not actively abiding by the code,” Vogel said. “At a minimum, they can claim that they are a responsible corporate investor because they support it.”

Vogel does not object to or oppose the university signing the code, referring to it as a gesture of “good common sense.” But Vogel is skeptical — not of the university’s intentions, but of Japan’s.

“This code is one small piece in the Japanese government’s effort to move Japan towards a more shareholder-friendly environment, and I’m not sure if it’s a good direction,” Vogel said.

Contact Harini Shyamsundar at [email protected] and follow her on Twitter at @hshyamsundar.