October 14, 2003
Resolutions Ask TIAA-CREF to Practice the Good Corporate Governance It Preaches
by William Baue
TIAA-CREF faces several resolutions asking it to reconcile its strong corporate governance advocacy
with what filers describe as its own weak governance policies.
The Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA-CREF) is widely regarded as a strong promoter of good
corporate governance at the companies it holds in its portfolios. However, policy- and
account-holders with TIAA-CREF have filed a number of resolutions for the November 13 annual
meeting calling into question the organization's own internal corporate governance. Resolution
filers and their supporters express concern that TIAA-CREF's external governance advocacy may ring
hollow coming from an organization with dubious internal governance practices.
seems logical that portfolio companies will give less attention to TIAA-CREF if its activities are
viewed as mere public relations," said Curt Verschoor, a research professor at DePaul University's
School of Accountancy.
Dr. Verschoor co-filed a resolution, or "Participant Proposal II"
as the CREF proxy
calls it, with Stephen Viederman, the co-founder of the Initiative for Fiduciary Responsibility.
The proposal asks CREF to adopt recommendations from the Conference Board Commission
on Public Trust and Private Enterprise. For example, this blue ribbon commission recommends
that organizations "avoid having one individual functioning as Chairman, as President, and as CEO
with no other director appointed Lead Independent Director or Presiding Director."
TIAA-CREF website lists
Herbert Allison as chairman, president, and CEO of TIAA-CREF.
Participant Proposal I,
filed by Wiworn Kesavatana-Dohrs, a lecturer in Asian Languages and Literatures at the University
of Washington, explicitly and exclusively recommends splitting the positions of CEO and Chairman of
the Board at CREF. A longer version of this proposal received 23.46 percent support from voting
TIAA-CREF participants in 2002. The US Securities and Exchange Commission (SEC) allowed TIAA-CREF
to omit three subsections of the 2002 proposal in this year's proxy.
However, the SEC
did not allow TIAA-CREF to omit the proposal's statement that CREF's Social Account is rated the
worst of socially responsible mutual funds in the 2002 NIS Social Rating of socially responsible
mutual funds. It also allowed the proposal to enumerate its grievances with TIAA-CREF's corporate
"Whereas, TIAA-CREF Policy Statement on Corporate Governance is
woefully inadequate and OPPOSES shareholder resolutions concerning separation of the positions of
CEO and chairman; OPPOSES designation of a lead director; OPPOSES the formation of shareholder
advisory committees; OPPOSES the requirement that candidates for the board be nominated by
shareholders; OPPOSES a requirement that directors must attend a specific percentage of board
meetings, unless the board supports such measures; and OPPOSES a requirement that directors be
prohibited from providing consulting services," the proposal states.
"We acknowledge that
there are specific groups/organizations that disagree with some of TIAA-CREF's investment and
governance policies," said Stephanie Cohen Glass, director of TIAA-CREF's corporate communications.
"We, however, believe we have strong corporate governance practices and continue to review our
policies to adopt the best practices."
Accordingly, the TIAA-CREF Board of Trustees
recommends voting against Participant Proposal I this year.
"At the outset, participants
should note that CREF's current President and Chief Executive Officer, Herb Allison, is not on the
CREF Board and does not serve as the Board's chairman," the Board of Trustees wrote in their
According to Ms. Glass, Mr. Allison is chairman of TIAA-CREF, the
"brand name" for the overarching organization that encompasses TIAA and CREF as two separate
entities, and also chairman of the TIAA board of trustees. However, he has no chairmanship
responsibilities over CREF, Ms. Glass told SocialFunds.com.
Furthermore, Ms. Glass points
out that TIAA-CREF does not advocate for companies to split their CEO and chair positions.
"Our Policy Statement on Corporate Governance clearly states that we recognize the
responsibility of company boards to organize its functions and conduct its business in the manner
it deems most efficient, consistent with these or similar governance principles," Ms. Glass said.
This position puts TIAA-CREF at odds with most corporate governance advocates as well as
with corporate directors themselves. The Participant Proposal I cites a McKinsey & Co. survey in
which of nearly 70 percent of respondents (180 US directors representing almost 500 companies) said
that the roles of Chairman of the Board and CEO should be separated.
"It seems evident
that TIAA-CREF's areas of interest are narrowed to exclude those issues in which it does not itself
comply," Dr. Verschoor told SocialFunds.com.