BlackRock to give clients more leverage on accountable holdings

LONDON / BOSTON, Oct. 7 (Reuters) – BlackRock Inc (BLK.N) plans to give big customers more weight on votes cast at annual company meetings, a move that some industry experts say could lead to the companies to face more opposition from the rebels. shareholders.

BlackRock – the world’s largest fund manager with $ 9.5 trillion in assets – typically votes for stocks on behalf of investors in its funds, making it one of Wall Street’s most influential voices on issues ranging from elections of corporate directors to climate change and the diversity of the workforce.

Starting next year, however, some institutional account holders will be able to vote themselves about 40% of the $ 4.8 trillion in assets held in BlackRock’s equity index strategies, BlackRock said in a letter to clients.

Others might choose to choose a third party voting policy and use BlackRock to submit the votes.

The changes could make it harder for companies to assert their choices in shareholder votes, as this will give more leverage to many institutional investors who often have more stringent corporate governance voting policies, such as large pension funds and endowments, said Matt DiGuiseppe, vice president chairman of corporate governance software company Diligent.

“I expect this to have a significant negative impact on the level of support that (a company’s) management receives,” said DiGuiseppe.

Not all industry insiders agreed.

Bruce Goldfarb, chairman of attorney Okapi Partners LLC, said he expected the changes to have only a marginal impact.

“I doubt that many investors in products managed by BlackRock have policies too different from the well-designed policies already defined by BlackRock and executed by its investment management team,” Goldfarb said.

Either way, this move makes business sense for BlackRock, said James McRitchie, a private investor who files numerous shareholder resolutions as more investors look at the social impact of their portfolios. .

“More and more people are seeing their investments as mechanisms for engagement, and not just as bets on winning alpha,” or higher returns, he said.

The choice to cast a shareholder vote in companies would be offered in certain index strategies held in separately managed accounts and in certain mutual funds in Britain and the United States, BlackRock said.

“These options are designed to allow you to have more of a say in the proxy voting, if that is important to you,” the letter from BlackRock reads. BlackRock aims to add voting choices to more investment products, according to the letter.

A massive influx of money into low-cost index funds has left BlackRock frequently holding 5% or more of top companies. The company and its competitors traditionally relied on corporate recommendations on shareholder votes, although this has started to change.

This year, under the leadership of a new CEO, BlackRock has opposed directors and supported climate resolutions more often, although it continued to support executive compensation 95% of the time. time in American companies. Read more

Jill Fisch, a law professor at the University of Pennsylvania, praised BlackRock’s changes to allow pension funds and other large asset owners to have more say in corporate decisions and said Rival fund managers could move in the same direction, at least for US investors.

“The great asset managers are trying to do a good job, but these are not the people I want to run the country,” Fisch said.

Reporting by Simon Jessop in London and Ross Kerber in Boston Additional reporting by Svea Herbst-Bayliss in Boston. Editing by Greg Roumeliotis and Steve Orlofsky

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