by Brian on November 19, 2003

I just got some voting slips for participant proposals for the TIAA-CREF accounts that I have. I assume many readers of this blog have similar accounts, which is why this might be interesting.

One of the proposals was to stop investing in all companies that support gun control. It almost goes without saying that this is a Very Bad Idea, and one that I’d strongly recommend people vote against. I doubt the proposal has much chance, but just in case a few gun-lovers with college jobs get behind it, it is worth taking the time to vote it down.

The accompanying documentation to the vote included a mealy-mouthed pro forma objection to the proposal from the board, that basically just said “We’re Friedmanites about business ethics, so we don’t think we should care what the companies say or do as long as they make a lot of money.” (Obviously they did not put it quite like that.) I’m not a Friedmanite so I think this is a lousy argument. But I still think there are plenty of reasons to vote against the proposal.

1. Gun control is a Good Thing, so we should be supporting companies that support it, not opposing them.

2. It’s inappropriate to choose which companies to invest in on the basis of their political views.

3. Based on recent NFL results, it seems that groups that support gun control are likely to exceed expectations, and hence should be supported. [1]

I should say a little more about 2. I think it is appropriate to choose which companies to invest in on the basis of their social practices. Indeed, I think shareholder activism, backed by a willingness to move funds, is sometimes a better way to promote social goods than political agitation. To that end, I have most of my investments in so-called socially responsible investment funds. (This isn’t entirely by choice – my other investments took a pretty bad hit in the crash, but the touchy-feely ones held up pretty well. The way they seemed to do so well in bad times might be another proof that there is a God.)

But I think we should distinguish here between which political platitudes a company mouths and what actions it does. The latter may be grounds for taking dramatic actions like removing all institutional funds from them, but the former are not. I wouldn’t sell off my shares in a company because it lends its name to anti-abortion petitions. (Though I would obviously vote against supporting such petitions.) I would be much more tempted to sell them off if the company restructured its health care policies to ensure that its employees could not be covered for abortions.

The current proposal, apart from being on the Wrong Side of the political debate, seeks to punish companies for what they say, not what they do. And I don’t think that’s appropriate, especially for a large investment house.

Having said that, I was quite offended by the way the various proposals were laid out. As well as the “More Money for Gun-Lovers” proposal, the ballot included various proposals put forward to reform various aspects of the fund governance, some other social policy oriented proposals, and the re-election of two trustees. The board approves the re-election, but not the proposals.

So the dead-tree ballot paper is split into two columns, with the one thing supported by the board in one column headed “The Board of Trustees recommends a vote FOR item 1” and the others in a column headed “The Board of Trustees recommends a vote AGAINST the following items.” Subtle, eh? Then when I went to vote online, there’s a single check-box for those who want to vote exactly as the board recommends. Needless to say, there was no such check-box for those wanting to vote against the board’s recommendation in every case.

If the fund is going to have this kind of ‘participant involvement’ it should not be stacking the deck in favour of the status quo this way. It’s entirely proper for the Board to investigate proposals and report on their consequences before they go to a vote. It’s not permissible to draw the ballot paper up on the basis of those reports. This is about as ridiculous as ordering candidates on a ballot paper by the number of votes people from their party got in the most recent election.

[1] The NRA Blacklist includes the Kansas City Chiefs, who, before an unfortunate stumble last weekend, were tearing up the league. They still look like having a pretty good season, and should give the Pats quite a scare in the AFC title game. If this is the kind of organisation that supports gun control, I want shares in them!



Mac Thomason 11.20.03 at 3:14 pm

Glenn Reynolds is trying to influence TIAA-CREF policy now?


Tim Buchman 02.14.04 at 7:15 pm

Well, you can read a report on the 2003 CREF Annual Meeting at if you like. The big news turned out not to be that there was over an hour of discussion of Socially Responsible Investing. Rather, it was that the meeting had to be rescheduled, the proxies resent (at our expense, of course), and this avoided a challenge to the November ballots being printed in the wrong order!

The news for 2004 is that a rescheduling of the meeting to June, 2004 was stealthily announced on your Oct-Dec 2003 Statement of Account. That means the deadline for submitting pesky proposals passed on February 12, 2004. Now there’s a rumor it will be moved to Charlotte, NC to further reduce attendance. Does shareholder (i.e. Participant) democracy look so bad now?

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