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Can shareholder activism make a positive difference? Based on our experience at TIAA-CREF, the answer is yes. In the October 1996 issue of Director's Monthly, John H. Biggs, then chairman and CEO, described TIAA-CREF's corporate assessment program. Since then TIAA-CREF- through this program and our other governance initiatives- has made significant progress in advancing active, independent boards and other 'good governance' practices.
TIAA-CREF is the largest private pension system in the nation. With assets of approximately $275 billion, it serves more than 2 million participants employed in education and research. The Teachers Insurance and Annuity Association (TIAA) and the College Retirement Equities Fund (CREF) are the two components of the system, which was created in 1918 to provide retirement income and life insurance to college professors. With an increasing diversity of products- including annuities, insurance, mutual funds, trust services and tuition financing-TIAA-CREF is changing rapidly. But our basic goals remain constant, including our commitment to good corporate governance and strong shareholder rights.
In fact, in the last ten years we have stepped up our corporate governance activities by adding resources to our corporate assessment program, filing friend-of-the-court briefs on cases with important implications for shareholder rights, and developing new initiatives like our effort to end a form of take over defense called the 'dead hand poison pill.' We have helped transform the process and approach by which equity compensation is awarded to executives. Globally, we are seeking to foster more meaningful international standards for corporate governance, shareholder rights and corporate transparency.
The TIAA-CREF staff and consultants conduct activities in conjunction with the committees on corporate governance and social responsibility of TIAA and CREF. These committees consist of individuals who collectively bring an extraordinary breadth of experience and background from law, finance, economics, the humanities and corporate management.
We believe that in the long run, our corporate governance program produces positive investment results. Our bottomline success in the following examples demonstrates that our program is serving a worthwhile purpose for our beneficiaries and for corporate America in general.
Particular Past TIAA-CREF Actions
We are willing to take significant steps to protect our rights and interests as shareholders. In a much-publicized case, TIAA led a successful effort to oust the board of Furr's/Bishop's, where directors appeared indifferent to shareholder concerns. Earlier, we engaged in high-profile efforts at W.R. Grace and at Eramet, a French company.
At Grace, where we had a major position, we were concerned in 1995 about the sudden departure of the company's CEO at a time when we backed his business strategy. We questioned the independence of the board, which seemed too close to the company's chairman and former CEO. Our shareholder activism led to a substantial reconfiguration of the board, with its size reduced to 12 from 22, and hastened the retirement of many long-term directors, including the chairman. We believe our action helped to keep the strategic refocusing of the company on track, with substantial benefits for shareholders. The Securities and Exchange Commission later found that the board of Grace, at the time of our challenge, did not meet its responsibilities under federal securities laws and otherwise acted improperly.