July 27, 2022
Proxy Voting: BlackRock Gave Companies a Passing Grade
Yesterday, BlackRock Investment Stewardship released a 27-page summary of the 72-page “Voting Spotlight” that it published last week. The reports detail the asset manager’s engagement & proxy voting stats, its rationale for voting decisions, and its ambitions for the BlackRock Voting Choice program. BlackRock makes sure to note that its core focus continues to be long-term, durable financial performance and that it highly values discussions that come from engagements. Based on the voting results this year, it seems that these conversations have been a valuable use of company & director time.
BIS doesn’t rely on the recommendations of proxy advisors – it follows its own policies. So, what voting outcomes did those policies & engagements yield this year? Here’s an excerpt from page 12 of the Spotlight:
Our voting in support of management was largely consistent with the prior proxy year: globally we voted in support of 90% of directors standing for election and for all items on the agenda at 57% of shareholder meetings (also 57% last year). This year, BIS was more supportive of management in the Americas and EMEA, where companies have made significant progress on the governance and sustainability matters that inform our voting.
In the Americas, we were more supportive of directors as companies made substantial improvements in board diversity; we did not support the election of 4% of directors (6% last year) for lack of board diversity.
In both the Americas and EMEA, we were also more supportive of companies with material climate risk in their business models as they improved their climate action plans and disclosures, voting to signal concern at 155 companies (264 last year).
BIS centers our stewardship work in corporate governance. In our experience, sound governance, in terms of both process and practice, is critical to the success of a company, the protection of shareholders’ interests, and long-term shareholder value creation. That is why board quality and effectiveness remain a top engagement priority, and a key factor in the majority votes cast on behalf of clients. Like last year, our leading reasons for not supporting director elections — and management proposals more broadly — were governance-related: 1) lack of board independence, 2) lack of board diversity, 3) directors having too many board commitments and 4) executive compensation that was not aligned with company strategy or long-term performance.
BlackRock goes on to note that – due to a combination of overly prescriptive resolutions and corporate progress on climate disclosure & action – it voted for fewer climate-related shareholder proposals this year. It also voted “against” only 176 directors for climate-related concerns this year, compared to 254 last year.
These stats aren’t too surprising: BlackRock emphasized the need for an “orderly transition” to net-zero in commentary early this year, which Lawrence wrote about on PracticalESG.com. That was a sign that the asset manager would take a measured approach to new “asks.” In May, it published late-season commentary and guidance to signal its lower support for ‘22 shareholder climate resolutions, which I blogged about at the time on our “Proxy Season Blog.”
Overall, BlackRock supported 22% of the E&S shareholder proposals that it voted on. Unlike its declining support for aggressive climate proposals, it supported 54% of proposals for DEI audits. Here’s the breakdown of why the Investment Stewardship team voted the way it did:
– Supported because in the financial interests of long-term shareholders – 22%
– Not supported because too prescriptive/immaterial – 21%
– Not supported because not beneficial to shareholders – 8%
– Not supported because company implemented/company progress – 46%
– Not supported, rationale unspecified (voted by independent fiduciary) – 2%
While BlackRock’s acknowledgement of company progress is very reassuring, it doesn’t mean we can all rest on our laurels. BlackRock says it doesn’t anticipate significant changes in its global principles and voting guidelines or its engagement priorities – which include board quality & effectiveness; strategy, purpose & financial resilience; incentives aligned with value creation; climate & natural capital; and company impacts on people. All of these topics are complex, and practices continue to evolve. The write-up continues to emphasize an “orderly energy transition” towards eventual decarbonization – BlackRock just disfavors proposals that micro-manage how companies go about that process.
To hear from Michelle Edkins, Managing Director on BlackRock’s Investment Stewardship team, about her take on “ESG Hot Topics” and “Climate Disclosure – What to Do Now,” join us in October for our “1st Annual Practical ESG Conference” as well as our “Proxy Disclosure & 19th Annual Executive Compensation Conferences.” Sign up online, email firstname.lastname@example.org, or call 1-800-737-1271. You can bundle the conferences together for a reduced price.
– Liz Dunshee