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The world’s largest asset manager is experimenting with near real-time reporting on what happens when companies don’t respond to its concerns on topics such as climate change.
BlackRock Inc. says it’s willing to be patient with companies it invests in, but if it doesn’t see progress, it won’t hesitate to use proxy voting to send them a message. Now it’s disclosing some of its recent votes and the reasons behind them.
When BlackRock first supported and helped pass a shareholder proposal in May seeking a report from Occidental Petroleum Corp. on the business impacts of climate change, it put out a vote bulletin explaining why it didn’t follow the board’s recommendation. It’s put out four more bulletins, including most recently one saying why it voted for a similar climate proposal at Exxon Mobil Corp.
BlackRock’s latest bulletin also showed that it voted against two Exxon directors after repeated requests to meet with the board to better understand its oversight of climate risk and other issues were rebuffed.
The bulletins are part of “a bigger story” of transparency around engagement between companies and investors and the impact it has on voting, said Allie Rutherford, a partner at CamberView Partners LLC, which advises public companies on shareholder activism and engagement. “I think we’re going to see increased reporting as investors explain how they incorporate engagement into their vote decisions,” Rutherford told Bloomberg BNA.
Mutual fund managers are required to disclose their voting records and policies by August of each year. The chief executives of Fidelity Investments and the Vanguard Group fought the requirement when it was first proposed by the Securities and Exchange Commission because they thought it would politicize proxy votes.
Fidelity, Vanguard and State Street Global Advisors, the world’s third-largest asset manager, didn’t comment on whether they’d ever consider going beyond required reporting to do the same kind of voluntary disclosure as BlackRock.
BlackRock already explains votes in quarterly reports, but those explanations usually don’t identify the company. Its plan with the bulletins is to publish, on a very limited basis, statements on certain “high-profile” proposals up for consideration at companies’ annual meetings, either on the day of the vote or shortly after.
“We want to be more transparent around what’s important to us and where we’re spending our time,” BlackRock spokesman Ed Sweeney told Bloomberg BNA. The bulletins are meant to show clients and others how votes are used when companies are unresponsive to its “engage first” approach.
“This is a more public forum than the private-style engagement that a lot of institutions tend to start with,” Donald W. Cassidy, executive vice president of business development and corporate strategy at proxy solicitor Georgeson LLC, told Bloomberg BNA.
Cassidy, who previously led the corporate governance policy and voting process for Fidelity’s U.S.-based funds and institutional client portfolios, said the bulletins are “an interesting outgrowth” of the different ways that institutions are now seeking to communicate with companies and influence their policies.
State Street Global Advisors is also wielding its voting power on topics such as bringing more women onto corporate boards. The investment management division of State Street Corp. says it will vote against board members responsible for director nominations or governance at companies that fail to act on gender diversity.
As large fund managers get more vocal about what they want to see from portfolio companies, some have been called out by researchers and other investors for not voting in line with their stated positions.
“It isn’t just voting and it isn’t just engagement,” Fiona Reynolds, managing director at the Principles for Responsible Investment (PRI), told Bloomberg BNA. “It’s the combination of the two things.”
This proxy season, the United Nations-backed PRI, which includes BlackRock, Fidelity, State Street and Vanguard as signatories, launched an online platform where members can declare their proxy votes to each other ahead of time. “We would really like to see much more transparency around voting,” Reynolds said.
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BlackRock's vote bulletins are available at http://src.bna.com/pNx
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