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TIAA-CREF urges adoption of new accounting procedures

July 30, 2002

Hoping to encourage more reliable financial reporting by the companies in which it invests, TIAA-CREF has written to the chairs of more than 1,700 major corporations, urging them to account for stock options in their financial statements.

According to an article in "The Chronicle of Higher Education," John H. Biggs, chair of the pension-fund group known as the Teachers Insurance and Annuity Association-College Retirement Equities Fund, said in the letter that reporting options more explicitly in financial statements would enhance corporate credibility by providing "a more accurate account of the company's costs."

In taking the action, TIAA-CREF, the largest pension-fund manager for people working in academe and research, becomes one of several organizations calling on companies to alter their financial reporting practices.

Biggs said that current practices encourage excessive and "in some cases even profligate" uses of options and "impeaches the credibility of financial reports."

Biggs sent his letter to every U.S. company in which TIAA-CREF has holdings worth at least $100,000. The 1,754 companies account for 95 percent of its equity holdings in the United States.

A more detailed explanation can be found in the July 25 edition of "The Chronicle of Higher Education."