Stay current on changes and developments in corporate law with a wide variety of resources and tools.
State Street Corp., Vanguard Group, and other big passive investment managers’ increasingly vocal stance on issues such as climate change and diversity shows in the way they vote.
Investors are more likely to vote “for” or “against,” rather than abstain like they did in the past, when these kinds of issues come up at companies they own, according to the latest data from proxy vote processor Broadridge Financial Solutions Inc.
Abstentions, generally seen as having no opinion, were used on environmental and social proposals from shareholders at U.S.-listed companies less than 4 percent of the time this year, Broadridge found. That’s down from more than 9 percent a year ago.
“These large asset managers are coming out and being very specific about what they’re expecting from companies,” Sharyn Bilenker, Broadridge’s vice president of corporate affairs and strategic development, told Bloomberg Law. “When they don’t get that response or they don’t get clarity, they’re really putting their votes where their mouth is.”
The trend toward fewer abstentions showed up in proposals asking companies including Exxon Mobil Corp. to report on long-term business risks from climate change.
The biggest factor in helping the proposal pass at Exxon for the first time was the shift by BlackRock Inc., Vanguard, and other investors that went from opposing a similar request last year to supporting it this year. But a bit more backing came from others like Fidelity Investments and State Street that previously abstained on some or most of their Exxon shares.
State Street, which split its vote at Exxon Mobil last year between shares it controls and those its asset owner clients direct, abstained on about a fifth of all environmental and social proposals globally in 2014. By 2016, it abstained on only one-tenth of them, according to State Street’s most recent asset stewardship report. It’s also using abstentions to send a different message than before. Now abstaining on a vote can mean that a company is doing some, but not all, of what State Street wants to see.
“The more we engage on these issues, the more we understand what good looks like,” said Rakhi Kumar, who leads asset stewardship and environmental, social, and governance investments at State Street’s asset management arm. On climate change, for example, State Street has outlined what it wants companies to report. It’s likewise offered companies guidance on getting more women onto their boards.
“I think that allows us to move away from a pure abstention to have an opinion as to whether this is good or bad,” Kumar told Bloomberg Law. State Street is supporting more environmental and social proposals than it did earlier, but still opposes the majority of them, according to its report.
Vanguard is another asset manager that typically abstained on environmental and social issues in the past. Its newly updated voting policy says it may support them if there’s a clear financial argument for doing so.
That tweak in language has already had an impact on voting habits: data provided by Vanguard show it abstained on just 11 environmental and social votes this year, a drop of more than 90 percent from last year.
“While there are some shareholders who vote specifically on social terms, the large institutions are voting with an economic interest as primary,” Paul DeNicola, managing director of the governance insights center at consultant PwC, told Bloomberg Law. He said that’s why disclosing climate risks and boosting board diversity, which has been linked to better corporate performance, have gotten large asset managers’ endorsement while other issues haven’t.
In 2016, Vanguard didn’t vote for any board diversity proposals in the U.S. Instead, it abstained on slightly more than half of them and voted against the rest. In 2017, when Vanguard’s chief executive officer called board diversity “an economic imperative,” not “an ideological choice,” it supported most of these proposals and didn’t abstain at all.
To contact the reporter on this story: Andrea Vittorio in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Yin Wilczek at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)