I submitted this proposal a few days before the February 12, 2004 deadline. Obviously, it can't have hyperlinks in a paper Proxy Statement, but if you want more details on my points, you can click on the highlighted phrases below.
Note the use of the word "ought". As in most shareholder democracies, resolutions at the CREF meeting are "advisory", or non-binding.
Shortly after I sent my proposal to the Corporate Secretary, I learned that 10 proposals had been submitted in total. CREF provided me with a copy of the 7-page, 13-footnote letter they sent to the SEC, seeking a "No Action" letter. That's
roughly equivalent to asking the SEC if they agree that my proposal can be "excluded" from the proxy statement on the various grounds described in CREF's letter. Because of my lack of experience in crafting an un-challengeable proposal, the proposal below was,
in fact, excluded from the proxy. If you're interested in the process, you can find most of the documents at the SEC site, by searching this page for "College Retirement".
Perhaps my proposal deserves some credit for Mr. Allison's frequent use of the term "fiduciary duty" at the 2004 meeting! It's certainly interesting that only half of the
proposals submitted made it to the proxy statement. I do know that one was withdrawn by the maker, because they were satisfied by CREF's promises to them.
Timothy H. Buchman ... owning 595.293 accumulation units in the CREF Stock Account, and 576.413 accumulation units in the CREF Inflation-Linked Bond Account intends to present the following resolution at the 2004 annual meeting.
Whereas, government regulations are ambiguous as to whether the primary fiduciary duty of the board of directors of a mutual fund is to the shareholders or to the company, and
Whereas, the current draft of the "reform-oriented" Senate Bill 1971 states, for example, only that contracts between a fund and the advisor be "in the best interests of the company"; and
Whereas, new Administrative Expenses, such as an increased marketing budget, and support of sports competitions and museum exhibitions may or may not be in the best interest of participants; and
Whereas, the same personnel who perform Investment Management and other services for CREF retirement participants are performing similar services to Institutional and Retail mutual fund customers at rates that are lower, capped, and / or with waivers of actual incurred costs;
THEREFORE BE IT RESOLVED that, beginning with the next Directors' election following the adoption of this resolution, the primary fiduciary duty of the CREF Board of Directors ought to be first and foremost to the participants.
Participant's Supporting Statement:
When CREF's business consisted almost entirely of retirement annuities in its' own tax-deferred accounts, participants had little reason to worry that anyone else might be "getting a better deal" than they were.
The interests of CREF (for example, to promote new retail products, or to interest outside plan administrators in CREF products, or to induce non-employee financial advisors to recommend CREF products to their own customers) may no longer be assumed to be those of current retirement participants.
In fact, investors in the CREF Stock Fund variable annuity (selected here as a prime example of the traditional "college retirement" product) paid more for Investment Management services alone, and more in total fees to TIAA-CREF affiliated companies than did investors in comparable funds in the Institutional and Retail CREF fund classes. Elliot Spitzer has described such (generally, legal) differences as unfair to investors. He has received no support from the SEC towards his position.
Investment Management, in particular, cannot be argued to be more expensive for retirement accounts. It could be expected that an 80%-indexed fund is cheaper to manage if it is larger, as is the CREF Stock Fund. But because the CREF Stock Fund is required to pay "actual costs", and the other lines of business are not, there is no limit on its' expenses. They rose 50% between 2000 and 2003.
This resolution does not mean that CREF should damage itself to make profits for the participants. A fiduciary is not required to take food out of her own mouth to feed an impoverished client. Rather, it formalizes the original mission of the organization, to improve the financial status of participants.
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