29 October 2021
Blackrock loosens the reigns on institutional investor voting
BlackRock Inc, the world’s largest asset manager with USD$9.4 trillion in assets, typically casts votes on behalf of investors in its funds, making it one of Wall Street’s most influential voices on matters ranging from corporate director elections to climate change and workforce diversity.
However, BlackRock Inc plans to give its clients more of a say on votes cast at company annual meetings, a move that some industry experts predict could result in companies facing more opposition from activist shareholders and making shareholder engagement and solicitation more difficult for corporations when voting rights are passed through to institutions.
From next year, BlackRock plans to allow its’ institutional clients invested in index strategies to opt out of having the asset manager vote their shares at annual shareholder meetings. Initially, this will apply to 40% of USD$4.8trillion in index equity assets that Blackrock manages. These clients will have the following four options available to them:
This voting policy change comes following feedback from its clients that they wanted more participation in proxy votes. Large asset managers, such as BlackRock, are facing increased scrutiny on their voting – especially on environmental and social matters – and heightened pressure to advocate for change at their portfolio companies. Changes like this could lead to companies finding it more difficult to push through their resolutions at shareholder meetings.
BlackRock has further indicated that it is committed to exploring all options to expand proxy voting choice to even more investors, including those invested in ETFs, index mutual funds and other products, which may require regulatory and operational system change.
The big winner in these changes is likely to be the proxy advisors whose research will be more heavily relied upon to guide institutional voting. The Harvard Law School Corporate Governance Forum summarises the changes in an article here: Expanding Proxy Voting Choice (harvard.edu)
However, BlackRock Inc plans to give its clients more of a say on votes cast at company annual meetings, a move that some industry experts predict could result in companies facing more opposition from activist shareholders and making shareholder engagement and solicitation more difficult for corporations when voting rights are passed through to institutions.
From next year, BlackRock plans to allow its’ institutional clients invested in index strategies to opt out of having the asset manager vote their shares at annual shareholder meetings. Initially, this will apply to 40% of USD$4.8trillion in index equity assets that Blackrock manages. These clients will have the following four options available to them:
- Use their own proxy voting policies
- Select from a menu of third-party voting policies
- Select to vote certain types of resolutions, or at certain companies, using their own policies & voting infrastructure
- Continue to have Blackrock cast proxy votes on their behalf
This voting policy change comes following feedback from its clients that they wanted more participation in proxy votes. Large asset managers, such as BlackRock, are facing increased scrutiny on their voting – especially on environmental and social matters – and heightened pressure to advocate for change at their portfolio companies. Changes like this could lead to companies finding it more difficult to push through their resolutions at shareholder meetings.
BlackRock has further indicated that it is committed to exploring all options to expand proxy voting choice to even more investors, including those invested in ETFs, index mutual funds and other products, which may require regulatory and operational system change.
The big winner in these changes is likely to be the proxy advisors whose research will be more heavily relied upon to guide institutional voting. The Harvard Law School Corporate Governance Forum summarises the changes in an article here: Expanding Proxy Voting Choice (harvard.edu)