BlackRock’s announcement says that its change to voting options is due to client demand. That would make sense, given the investment world’s growing interest in having their voice heard on ESG matters. The announcement may also ease the unease that some have expressed about the level of influence that can currently be exercised by a handful of behemoth asset managers.
In hindsight, though, some people who wished that BlackRock had less power over votes might end up regretting this “wish come true.” It is very early to predict exactly how this policy will play out in practice. But it seems that it may make it even more difficult for companies to track & predict votes during proxy season. Companies will now need to engage not just with BlackRock, but will also need to understand whether the index investor whose funds BlackRock manages will be following their own unique voting policy, following a specialty voting policy, continuing to use BlackRock Investment Stewardship, or casting unique votes only at particular companies or on particular resolutions. That’s a lot to figure out and track each year! Aon’s Karla Bos sent me this note:
Without attaching any judgment here, it certainly appears one logical result of extending more say in voting to institutional clients will be that it becomes more challenging for companies to know / reach / influence the voting shareholders and predict voting behavior across BlackRock-held shares. And that has broader implications given the explosion in ESG focus and voting support—although it is difficult for me to guess how that will manifest, e.g., will the voting institutions take a more or less stringent or consistent approach than BIS?
We also don’t know yet whether other big asset managers will follow BlackRock’s lead and offer something similar (Vanguard had already transitioned some of its voting power back in 2019). Even if they don’t, it’s possible that more investors who are interested in voting alternatives will migrate to BlackRock because of this “competitive advantage.” At any rate, on top of the changing number & nature of retail investors, changes to shareholder proposal rules, evolving ESG expectations, and the question mark on proxy advisor rules, 2022 is already shaping up to be a challenging proxy season. You might want to line up your proxy solicitor now, in case they get booked up.
– Liz Dunshee