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it votes tens of thousands of power proposals a year. The responsibility lies with a group of about 70 people.
Millions of people invest in the stock market through funds to track BlackRock indexes. As these passive investments have grown in popularity, the company’s shareholdings in 13,000 companies around the world have also increased. And it also has the strength of BlackRock’s investment management team.
A small group of analysts — BlackRock has about 18,400 employees — cares for the interests of investors in the company’s $ 4.6 trillion passive fund. This means measuring issues such as compensation for executives, climate change and access to abortion. CEOs turn time into analysts ’calendars. They have the power to remove executives and make corporate decisions.
The group last year spoke to 2,300 companies via email, phone calls and meetings, and eventually voted 165,000 proposals at 17,000 shareholder meetings.
“Sometimes you can feel a lot of power,” said a former analyst in the investment management team.
The growing popularity of fund indexes has made their managers the largest shareholders in many public companies. This is especially true of BlackRock, which has about $ 10 trillion managed by the world’s largest investor. The amount of capital the company manages for passive investors has tripled in the last decade.
BlackRock’s growth and the way it has sought to leverage its impact has impressed business executives, especially in the oil and gas industry. BlackRock’s management team voted in favor of 47% of environmental and social shareholder proposals last year. His aid helped an activist investor win board seats in the oil giant Exxon Mobil Corp.
“We have a new set of emperors, and they are people who vote for index fund shares,” said Charlie Munger, vice president of Berkshire Hathaway Inc..
and Warren Buffett’s business partner, he said earlier this year.
A group of Republican senators last month introduced a bill calling for individual investors in passive funds to be allowed to vote for their shares, reducing the power of BlackRock and the like.
Vanguard Group and State Street Corp..
, BlackRock’s two biggest rivals, also has small surveillance teams. Vanguard has about 60 analysts focused on management. State Street does not disclose the size of its management team, but an article on corporate governance in the 2020 Columbia Law Review estimated it to be 12. The group has grown since then, a company spokesman said.
BlackRock CEO Larry Fink has said he wants to get to a place where all individual investors can vote for their shares. The company has provided that opportunity to institutional investors who control $ 2.3 trillion in assets. Investors representing a quarter of that amount have been taken over by the company.
For now, the watchdog team is waiting for those who can’t vote or aren’t ready to vote for their shares.
It plays a particularly important role for index fund investors, “because they don’t have the opportunity to sell stakes in companies that don’t function as expected,” BlackRock said in a February report on its priorities for the 2022 proxy season.
The investment management team is led by Sandy Boss, who spent two decades at McKinsey & Co before joining BlackRock in April 2020.
Its analysts are senior, and some have just graduated from college, a BlackRock executive said. The team includes climate scientists, engineers and corporate governance specialists. They speak a total of 20 languages and work in 10 countries.
Each management analyst is assigned to cover a particular industry. They review the company’s proxy reports and third-party research, including MSCI Inc.’s ESG assessments and corporate governance transparency scores, at the Center for Political Accountability. Analysts also do their own research.
Institutional Shareholder Services Inc. and subscribes to Glass Lewis ’research, but does not“ follow blindly ”the voting recommendations of proxy consulting firms, BlackRock said in a recent report.
The ISS helps the watchdog team review common and unquestionable proposals. All the rest are sent to the management team for review. The group’s top priorities are board quality, strategy and financial resilience, executive compensation, climate and human resources issues.
Activist investors who want to shake up a company’s board sometimes present the management team directly. In some cases, candidate candidates are presented to members of the care team, either in person or, virtually, since the onset of the pandemic.
The group recently met with candidates for McDonald’s Corp..’s
In his campaign sponsored by Carl Icahn, the fast-food giant is trying to change the way it treats pregnant pigs, according to a BlackRock executive. (Mr. Icahn’s candidates lost.)
The busiest season for the group is from mid-April to mid-June, when U.S. companies usually hold their annual meetings. Ahead of a meeting that includes conflicting shareholder proposals, management analysts will present a recommendation to the group’s executive committee. The committee will sometimes consult with BlackRock’s active fund managers, who will make their own voting decisions.
Voting decisions are made solely by the management team; Mr. Fink and other BlackRock executives have nothing to say. “They run the business, we vote,” Ms. Boss said in an interview.
This is not to say that Mr. Fink has no influence.
In late 2020, Mr. Fink made a call with a few dozen groups in charge of U.S. delegation votes, according to people familiar with the matter. His message was clear: the team needed to do a better job of explaining the votes to company executives, people said, especially when it comes to climate-related proposals.
Mr. Fink’s main concern was with public perception. He didn’t want Wall Street to think that BlackRock had gone too far in pushing an environmental agenda, people said.
The company’s stance on climate issues has angered executives and sidelined it with states that have fossil fuel companies.
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The West Virginia Treasury Investment Committee stopped using the BlackRock fund earlier this year after the fund manager asked companies to achieve zero net emissions by 2050. And last June, Texas passed a bill calling on state entities to stop doing business with companies that boycott fossils. -fuel industry. While BlackRock has not argued in favor of the boycott, many saw it as a warning to the company and its members, who manage billions of dollars for Texas pensioners.
The BlackRock team has delved deeper in recent years to explain the reasons for high-level votes, such as the Exxon proxy fight. The index funds must report their votes to the Securities and Exchange Commission in August each year, and the group publishes quarterly reports on its BlackRock website.
In a memorandum released earlier this year, the management team said climate-related shareholder proposals had become more prescriptive and “intended to micromanage companies.”
The group said it would probably accept fewer climate proposals this year than last year.
Write to Angel Au-Yeung at email@example.com
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70 BlackRock analysts who speak for millions of shareholders
Source link 70 BlackRock analysts who speak for millions of shareholders