The TIAA-CREF Southern Service Center (opened in 2001) sits among many other corporate campuses North of Charlotte, NC. Unlike the older properties, parking is in an enclosed garage, and you have to pass a guarded (outsourced to Wackenhut) gate at the very entrance to the campus. TIAA-CREF's data center was moved here from New York City, and they have extensive generator power for emergency operation. They're linked to the large facility in Denver, CO. Despite the attempt to soften the exteriors with wood trusses, the complex has an intimidating, high-tech look. The main entrance rotunda, several stories high, could be the set for a science-fiction film.
Upon showing our admission tickets and photo IDs at the gate, we drove about 1/4 mile to the garage. The VISITOR badge we'd been issued opened the gate at the garage, where signs directed us to spaces reserved for Participants. The garage and buildings seemed so quiet that I suspect many people were given the afternoon off. Employee "minders" lined the long path we had to follow to the main building, where we turned in our admission tickets. Our bags were inspected, as the meeting notice indicated.
There were numerous documents available on a table outside the meeting. These included the two recently-issued (and newsworthy) "Principles" and "Statement" on Mutual Fund Governance, and a colorful, illustrated Annual Report in the traditional style of a public company’s report. I didn’t see any water or coffee this year.
The room was smaller than Wharton Auditorium in New York, which held the 2003 meeting. It was only about half-full. Not counting the Trustees and executives at the front, there were about 25 Participants and about 25 TIAA-CREF employees. (Actually, a TIAA-CREF employee can be assumed to be a participant!) The meeting started promptly at 2:00PM with a welcome from Herbert Allison. He introduced the others at the dais, E. Laverne Jones, George W. Madison, and Scott C. Evans.
Mr. Allison mentioned completion of the company's new institutional customer platform, which is called "TIAA-CREF Open Plan Solutions". It will be rolled out at Purdue in November. He also announced forthcoming products "TIAA-CREF Asset Management", "life-cycle" funds, brokerage accounts with cash management, and 15 more local offices. Although Mr. Allison's 2003 speech appeared in full on the TIAA-CREF website last year, they've only posted an abbreviated report for 2004 thus far. He justified the moving of the date and place of the meeting, and indicated that the date would move again, closer to the closing of the fiscal year. Because this meeting was shorter (1:45) and less contentious than last year's, I suspect they'll avoid New York City in the future. Watch your quarterly financial statements closely for notice of the next meeting, which I suspect will be in May or June. Proxy proposals are due by February 10, 2005.
I cannot confirm this, but based on use of the word “Open” last year, “Open Plan Solutions” may include the sale of non-TIAA-CREF products. My main concern about this is that it starts down the path to commissioned sales.
After a very complimentary introduction by Mr. Allison, Scott C. Evans, the Chief Investment Officer gave a brief report on CREF's 30 (!) funds. He spoke frankly about those with performance behind their benchmark, and mentioned replacing advisory teams. (It was not at all clear whether the replaced advisors are still employed here.) He briefly mentioned TIAA Traditional, although it's not "part" of this meeting, because he wanted to remind Participants that it is a valuable part of a diversified portfolio. The key words he stressed were "Efficient, Fully Invested, Diversified, and Low-Cost."
Mr. Allison then introduced the candidates for election of Trustees. Three of them (Jacob, Longstreth, and Ross) were absent for "previous commitments". Last year's new trustee (Macaskill), who was absent (the meeting was suddenly rescheduled from November 2003 to December 2003) for her first election, was present. I mention this not because appearance at a ceremonial occasion is really so important. (Although there were two days of meetings in Charlotte for them...) But these absences are testimony to the effect on participants of the changes in date and location of the Annual Meeting. David K. (Pratt Institute) asked whether candidates' publications and positions might be available during the proxy period. Mr. Allison said perhaps on the web site, if not in the proxy itself. All trustees were elected, with over 95% of the votes in their favor.
I've only used the first names of participants, because none of them have approved my sending their names around the world. Most of the names appear in full in the Proxy statement. The proponents of Proposals I (more Social Choice accounts) and V (divest tobacco) did not attend, and had not appointed anyone to speak for them. This could have allowed Mr. Allison to rule that they had failed to be introduced, but he did not do that. Despite a graceless comment by the proponent of Proposal II (divest gun control) about the need for a presenter (That opinion refers to a lack of solidarity among corporate watchdogs!), Allison allowed a vote to occur on Proposal I, and appointed Anne D., who had planned to speak in support of Proposal V, to present it. Although one can point out that he knows there is little danger they will win, Allison deserves considerable credit for allowing these proposals to be voted on (and by implication, to be introduced again next year). I have no evidence to offer, but I had the strong feeling that some of the motions were seconded by employees who had been given instructions to be ready to make a second.
Proposal II (divest gun control) was concisely presented with reference to the proxy text. There was no further discussion. (To repeat: Proposal II asks that companies that advocate gun control be divested by CREF funds.)
Curt V. (who co-wrote proposal IV) had been appointed to present Proposal III (divest gold mining) by the maker of that motion. He emphasized the investment risk in companies with exposure to environmental remediation and liability costs. He also pointed out that CREF had not supported a widely publicized motion at Freeport McMoRan's meeting to suspend payments to the Indonesian military.
He then presented his own Proposal IV (governance of portfolio companies). Curt pointed out that CREF does not "lead" on issues it consider important by announcing their stands for reference by other large shareholders. Allison replied, as he has been quoted in magazine interviews, that CREF finds working "behind the scenes" to be most effective. Curt V. also observed that (in CREF's opposing statement) the use of the word "misstates" to compare the numbers 40% and 40.02% was unfair.
Proposal V was then introduced. Anne D. pointed out that because her husband is already retired, he is not permitted to move his investments out of a fund that he considers to not be socially responsible. She also compared "fiduciary duty" (a term frequently invoked today by Mr. Allison – could that have anything to do with my own, excluded, resolution on “Fiduciary Duty”?) with the dangers of investing in tobacco companies. Participant Larry E. pointed out that tobacco is a legal product.
Mr. Allison then asked for general questions and comments. Neil W. expressed satisfaction about having held meetings between participant representatives and TIAA-CREF staff regarding socially responsible investment issues. Dennis B. asked about planning such meetings with his associates. Anne G. pointed out that it's false to create a complete dichotomy between fiduciary duty and social responsibility. I gave my speech, and after no one else wished to speak, was recognized a second time. I then complimented CREF on the two Mutual Fund Governance documents, and asked whether I was correct in reading the Proxy to say that the Trustees' compensation had been greatly increased. I noted that if anyone had asked me in 2003, I would have said that their compensation was not commensurate with their duties and responsibilities. This was the only question this year about compensation at CREF.
Mr. Allison answered all four of my questions. He said that the pricing of services to the funds was under review, and that the participants own the company, so they would be able to vote if any plan to go public were ever implemented. He said that the trustee compensation had been evaluated, and then increased. (I would describe it as roughly tripled, from $33,000 per year, but I chose not to focus on the actual dollars in my question.) I did say that I would not describe the new compensation as "excessive". Since I felt his answers were given in good faith, I think I failed to properly convey my question about the impropriety of charging new funds 8 basis points for investment advice, while charging the CREF Stock Fund 12 to 15 basis points. I plan to write to him about that.
The meeting was adjourned at 3:45PM. Compared to 2003, it was a "love fest". Unlike 2003, no reporters came up to me after the meeting, so I suspect that there weren't many there.
|