The Influence of Institutions on Corporate Governance Through Private Negotiations : Evidence from Tiaa-Cref

This paper analyzes the process of private negotiations between financial institutions and companies. It relies on a private database consisting of correspondence between TIAA-CREF and 40 of the firms it contacted during a period from 1992 to 1996. The analysis suggests that private negotiations are extremely important in our understanding of corporate governance. In more than half the cases, the companies agreed to adopt the proposal without even having voted on it. Over 95 percent of the time when TIAA-CREF contacts a company, the company eventually adopts the changes TIAA-CREF requests. TIAA-CREF achieved this high success rate despite only getting a majority vote in one case. Overall, the results cast doubt on the view that predominates in the literature, which states that institutions' efforts to improve corporate governance are ineffective because they rarely "win" proxy contests