TIAA-CREF Proposal to Divest its Shares in Freeport-McMoran's Irian
Jaya, Indonesia Mine
10/25/99
*******************************
RELAYED TEXT STARTS HERE:
Title: Freeport and TIAA-CREF
Source: College Retirement Equities Fund (CREF)
Status: Copyright 1999, contact source for permission to reprint
Date: October 25, 1999
TIAA-CREF has presented the following current shareholder proposal to
divest its shares in Freeport-McMoran's controversial gold mine in
Irian Jaya (http://www4.tiaa-cref.org/voting/cref/):
IV. Participant Proposals
Participant Proposal I
The first proposal asks that the Stock Account and Global Equities
Account divest from a particular company's stock. Therefore, only
participants from those accounts can vote on it. Since the proposal
would affect participants in these accounts differently, the votes
will be tallied separately for each account.
Ann Marchand, 7043 22nd Avenue N.W., Seattle WA 98117, owning 77.176
accumulation units in the CREF Stock Account and 114.715 in the CREF
Global Equities Account, has given notice that she intends to present
the following resolution at the annual meeting:
Whereas: Since 1967, PT Freeport Indonesia Company (PT-FI) an
operating unit of Freeport McMoRan Copper and Gold, Inc. (FCX) has
been operating on lands traditionally inhabited by indigenous people,
especially the Amungme and Komoro;
Whereas: PT-FI has discharged over 110,000 tons of tailings per day
into local Irian Jaya rivers and has expanded its milling operations
to exceed 190,000 cubic tons per day. In 1995, prior to a settlement
with PT-FI, the Overseas Private Investment Corporation, a U.S.
government agency which provided political risk insurance to this
operation stated that the mine "created and continue to pose
unreasonable or major environmental, health, or safety hazards with
respect to the rivers that are being impacted by the tailings, the
surrounding terrestrial ecosystem and the local inhabitants";
Whereas: PT-FI has attempted to ameliorate the social and
environmental damages by proposing the "one Percent Trust Fund Offer"
and the establishment of an Amungme Foundation, but the Amungme
Tribal Council (LEMASA), an organization representing one of the
indigenous communities affected by PT-FI's operations in Irian
Jaya,issued a resolution "unconditionally and absolutely" rejecting
these two proposals;
Whereas: It is unclear to shareholders how much environmental
liability, cleanup responsibility, and remediation costs may exist,
and no existing audit contains information on any actual
environmental liability;
Therefore, Resolved that the participants request that CREF take
steps to divest the CREF Stock Account/CREF Global Equities Account
of Freeport McMoRan Copper and Gold stock.
Opposing Statement of the Board of Trustees
The Board of Trustees recommends a vote AGAINST the proposal and
urges all participants to read carefully the following statement
before voting.
Management strongly believes that implementing proponent's
resolution, which seeks to impose subjective social investment
standards on the Stock and Global Equities investment programs, would
be contrary to the best interests of our participants.
Participants have the option of investing in the CREF Social Choice
Account, whose environmental screens currently exclude Freeport
McMoRan stock. Implementing proponent's divestment proposal or
similar proposals for other CREF accounts would deprive participants
of investment options that give financial concerns the highest
priority. To provide individual choice, we established the Social
Choice Account as a viable investment alternative for participants
wanting to make a sound financial investment but also to exclude
categories of investments for nonfinancial reasons. This carefully
designed account, which at almost $4 billion is now the largest
socially responsible fund in the world, has proven to be an excellent
option for those wanting social concerns to be considered along with
financial ones.
Indeed, were we to divest from a specific company because some
participants object to that company's environmental or social record,
there would be no reason why a multitude of such types of requests
could not be made. It would be difficult to fully consider those
requests and run an effective investment program for participants who
wish their investments to be based primarily upon financial analysis.
An additional problem with the proposal is that it would require us
to engage in a case-by-case debate on the facts, since often a
situation is more complex than what is described in a proponent
statement. For example, Freeport McMoRan's 1998 Annual Report's
review of the company's environmental and social programs clearly
indicates that there are two sides to every issue. This underscores
our concern that we cannot debate divestment issues each time a
participant brings a complaint against a single portfolio company or
industry.
We choose instead to follow the sound investment standards of our
professional money managers. Management continually monitors CREF's
portfolios to ensure that they remain well invested consistent with
their stated investment objectives. As part of the analysis of CREF's
actively-managed investments, we evaluate the effect any potential
environmental exposure or liability may have on a company's earnings
and prospects. If we conclude that investing in a company, such as
Freeport McMoRan, is not in our participants' best financial
interests, we will take appropriate action.
For these reasons, the board recommends a vote against the proposal.