Teacher’s Insurance and Annuity Association-College Retirement Equity Fund (TIAA-CREF) is the largest institutional shareholder in the United State, controlling over $400 billion in pension funds. Traditionally, TIAA-CREF has acted as a passive investor. However, the organization recently announced a tough new corporate governance policy. In a statement mailed to all 1,500 companies in which it invests, TIAA-CREF outlined a policy designed to improve corporate performance, including a goal of higher stock prices for the stock assets it holds, and to encourage corporate boards to contain a majority of independent (outside) directors. TIAA-CREF wants to see management more accountable to shareholder interests, as evidenced by its statement that the fund will vote against any director “where companies don’t have an effective, independent board which can challenge the CEO? Historically, TIAA-CREF did not quickly sell poor-performing stocks. In addition, the fund invested a large part of its assets to match the performance of the major market indexes, which effectively locked TIAA-CREF into ownership of companies in the indexes, Further complicating the problem, TIAA-CRFF owns stakes of from 1% to 10% in several companies, and selling such large blocks of stock would depress their prices. Common stock ownership confers a right to sponsor initiatives to shareholders regarding the corporation. A corresponding voting right exists for shareholders.
a. Is TIAA-CREF an ordinary shareholder?
b. Due to its asset size. TIAA-CREF must acquire large positions that it plans to actively vote. However, who owns TIAA-CREF?
c. Should the investment managers of a fund such as TIAA-CREF determine the voting practices of the fund’s shares, or should the voting rights be passed on to TIAA-CREF’s owners?