From the Financial Times news service, Ignites:
TIAA-Cref Beats Back Activists’ Shareholder Proposals
By Peter Ortiz May 17, 2013
Student protesters targeted TIAA-Cref’s New York City headquarters this week, accusing the firm of supporting Israeli human rights abuses through its investment selections.
The We Divest Campaign, a pro-Palestinian advocacy group, held the protest Monday outside the firm’s New York headquarters. The group was joined by Jewish Voice for Peace, which says it supports the rights of Jews, Palestinians and all peoples in the Middle East.
In addition, the We Divest Campaign submitted a shareholder proposal to the firm that would require TIAA-Cref to eliminate investments in companies that allegedly contribute to human rights abuses against Palestinians.
But TIAA-Cref asked the SEC for no-action relief to omit the shareholder proposal from its annual proxy statement, and the SEC sided with the firm.
TIAA-Cref’s annual shareholder meeting is expected to take place in July. It has been the scene of past protests by both groups dating back to at least 2010.
TIAA-Cref also gained the SEC’s assurance that it could omit from its upcoming proxy an unrelated shareholder proposal targeting its socially responsible funds. That proposal calls for divestment from health insurance companies, citing “ample evidence that the health insurance industry in this country routinely harms individuals and is rife with unethical behavior.”
TIAA-Cref argued to the SEC that both shareholder proposals aimed to interfere with ordinary business operations and micro-manage complex issues about which shareholders lack knowledge. The firm also said the proposals do not rise to the level of a “widely accepted significant social policy.”
Alana Krivo-Kaufman, Northeast field organizing fellow for the Jewish Voice for Peace, says her group targeted six companies that profit from the Israeli occupation of Palestine.
She notes that TIAA-Cref president and CEO Roger Ferguson acknowledged during last year’s shareholder meeting the “effective work” her group had done to bring attention to the issue. Krivo-Kaufman’s group says it also believes they may have influenced TIAA-Cref’s decision to drop Caterpillar from two funds that bill themselves as socially responsible.
A pro-Israel group, StandWithUs, disputed Jewish Voice for Peace’s characterization that it influenced TIAA-Cref’s decision to drop Caterpillar.
TIAA-Cref’s decision to remove Caterpillar from the SRI funds, Social Choice Account, a variable annuity, and the Social Choices Equity mutual fund, was due to the firm’s failure to make the MSCI Environmental, Social and Governance indices, according to a spokesman. Other TIAA-Cref funds still invest in Caterpillar.
MSCI’s website notes that Caterpillar’s ESG rating downgrade was tied to management of its employees and supply chain challenges. MSCI did not respond to requests for comment by deadline.
Jim Dugan, spokesman for Caterpillar, said in an e-mail response to questions that MSCI ESG issued a statement at the time noting the “primary reason for the removal was tied to a labor dispute we had at the time in Canada.”
TIAA-Cref argued the pro-Palestinian proposal by Steve Tamari was “nearly identical” to another shareholder proposal submitted to the fund in 2011 and that the SEC agreed then to the firm’s request to omit it.
The 2011 proposal called on TIAA-Cref to engage with certain firms and “then to divest if ‘there is no commitment to cooperate,’” wrote Phillip Rollock, senior managing director and corporate secretary at the firm, in the request to the SEC for no-action relief. The 2012 proposal does not call for the firm to engage, but simply to divest, he added.
“In this regard, the Proposal interferes with [the firm’s] longstanding policy of engaging in ‘quiet diplomacy’ with portfolio companies, where appropriate, which is an integral part of [the firm’s] investment activities,” Rollock wrote.
Rollock also reminded the SEC that in 2011 the agency acknowledged that shareholder “proposals concerning Israel and the West Bank do not raise significant policy issues.” As a result, Rollock said, the proposals deal with a matter relating to the firm’s ordinary business operations and thus can be excluded from the proxy statement under federal securities laws.
The author of the shareholder proposal, Tamari, a professor of Middle East history in Illinois, says he does not want to tell TIAA-Cref how to run its funds.
“My main concern is that my money is going to companies that are complicit in some way with the occupation,” he says.
TIAA-Cref also sought to differentiate the proposal from anti-genocide proposals on human rights abuses in Sudan. In 2010 it divested from four companies with ties to genocide in Darfur after pressure from the activist group Investors Against Genocide, which has urged other funds firms to do the same.
“There exists a broad consensus that the activities targeted in the Anti-Genocide Proposals — genocide and egregious human rights violations in Sudan — are abhorrent, and deserving of universal condemnation,” Rollock wrote.
Lawyers who represent Tamari on the shareholder proposal counter that TIAA-Cref does not offer facts to support its contention that the issue is not subject to “widespread public debate and increasing recognition.” The lawyers cite the International Court of Justice, U.N. General Assembly, churches, universities and other groups that share its concerns.
The lawyers also quote a March speech to Israelis in Jerusalem by President Barack Obama, who criticized continued Israel settlement as “counterproductive to the cause of peace.” Obama told the audience, “Just as Israelis built a state in their homeland, Palestinians have a right to be a free people in their own land.”