BlackRock, the world’s biggest investor, has its headquarters in
JEENAH MOON/BLOOMBERG NEWS.
The 70 BlackRock Analysts Who Speak for Millions of Shareholders
The firm’s investment stewardship team votes $4.6 trillion worth
of shares for passive investors; ‘it can feel like a lot of power’
June 18, 2022 8:00 am ET
BlackRock Inc. casts
votes on tens of thousands of proxy proposals a year. The
responsibility rests with a team of about 70.
Millions of people are
invested in the stock market through BlackRock’s index-tracking
funds. As these passive investments have grown in popularity, so have the firm’s
stakes in 13,000 companies world-wide. And so has the clout of BlackRock’s
investment stewardship team.
The tiny group of
analysts—BlackRock has around 18,400 employees all told—looks after the
interests of investors in the firm’s $4.6 trillion worth of passive funds. That
means weighing in on matters as varied as executive compensation, climate
change and abortion
access. Chief executives jockey for time on analysts’ calendars. They
have the power to unseat directors and upend corporate decision-making.
The team last year engaged
with 2,300 companies via emails, phone calls and meetings and ultimately voted
on 165,000 proposals at 17,000 shareholder meetings.
“It can feel like a lot of
power sometimes,” said a former investment stewardship team analyst.
The surging popularity of
index funds has made their managers the largest shareholders in many public
companies. That is especially true of BlackRock, the world’s biggest investor
with some $10
trillion under management. The amount of equity the firm manages for
passive investors has more than tripled over the past decade.
BlackRock’s growth and the
way it has sought to wield its influence has rankled corporate executives,
particularly those in the oil-and-gas industry. BlackRock’s stewardship team
voted in favor of 47% of environmental and social shareholder proposals last
year. Its support helped an activist investor win
board seats at oil giant Exxon
“We have a new bunch of
emperors, and they’re the people who vote the shares in the index funds,”
Charlie Munger, the vice chairman of Berkshire
Hathaway Inc. and
Warren Buffett’s business partner, said
earlier this year.
The firm’s stance on climate issues has irked states that are
home to fossil-fuel companies.
PHOTO: JOE CAVARETTA/SOUTH FLORIDA SUN-SENTINEL/ASSOCIATED PRESS
A group of Republican senators last
month introduced a bill calling for individual investors in passive funds to
have the option to vote their shares, a move meant to curb the power of
BlackRock and its ilk.
Vanguard Group and State
BlackRock’s two biggest rivals, also have small stewardship teams. Vanguard has
around 60 analysts focused on stewardship. State Street doesn’t disclose the
size of its stewardship team, but a 2020 Columbia Law Review article on
corporate governance estimated its head count at 12. The team has grown since
then, a company spokesman said.
BlackRock Chief Executive
Larry Fink has said he wants to get to a place where all individual investors
can vote their own shares. The firm has given that option to institutional
investors that control some $2.3 trillion in assets. Investors representing
about a quarter of that sum have taken the company up on the offer.
For now, the stewardship
team is looking out for those who can’t, or aren’t ready to, vote their own
It plays an especially
important role for index-fund investors because they “do not have the option to
sell holdings in companies that are not performing as expected,” BlackRock said
in a February
report on its priorities for the 2022 proxy season.
The investment stewardship
team is led by Sandy Boss, who spent two decades at McKinsey & Co. before joining
BlackRock in April 2020.
Its analysts range in
seniority—their average tenure is 15 years—and some are fresh out of 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
Each stewardship analyst
is assigned to cover a specific industry. They dissect company proxy reports and
third-party research, including ESG ratings from MSCI Inc. and
corporate-governance transparency scores from the nonpartisan nonprofit Center
for Political Accountability. Analysts also conduct their own research.
The team subscribes to
research from Institutional Shareholder Services Inc. and Glass Lewis but
doesn’t “blindly follow” the proxy-advisory firms’ voting recommendations,
BlackRock said in a recent report.
ISS helps the stewardship
team screen for routine, uncontroversial proposals. All the others are sent to
the stewardship team for review. The team’s biggest priorities are board
quality, strategy and financial resilience, executive compensation, climate and
Activist investors looking
to shake up a company’s board sometimes pitch the stewardship team directly. In
some cases, they introduce their director candidates to members of the
stewardship team—in person or, since the start of the pandemic, virtually.
BlackRock CEO Larry Fink has pushed team members to do a better
job explaining their votes to company executives.
PHOTO: SHANNON STAPLETON/REUTERS
The team recently met
candidates for McDonald’s
backed by Carl Icahn in his campaign to get the fast-food giant to change
how it treats pregnant pigs, according to a BlackRock executive. (Mr.
Icahn’s nominees lost.)
The team’s busiest season
is mid-April to mid-June, when U.S. companies tend to hold their annual
meetings. Before a meeting that involves contentious shareholder proposals,
stewardship analysts will present a recommendation to the team’s executive
committee. The committee will sometimes consult with BlackRock’s active-fund
managers, who make their own voting decisions.
Voting decisions are made
by the stewardship team alone; Mr. Fink and other BlackRock executives have no
say. “They run the firm, we run the voting,” said Ms. Boss in an interview.
That doesn’t mean Mr. Fink
has no influence.
In late 2020, Mr. Fink
convened a call with a few dozen or so members of the team in charge of U.S.
proxy votes, according to people familiar with the matter. His message was
clear: The team needed to do a better job explaining their votes to company
executives, the people said, particularly around climate-related proposals.
Mr. Fink’s main concern
was around public perception. He didn’t want Wall Street thinking that BlackRock
had gone too far in pushing an environmental agenda, the people said.
The firm’s stance on
climate issues has angered executives and put it on the outs with states that
are home to fossil-fuel companies.
West Virginia’s treasury
investment board earlier this year stopped using a BlackRock fund after the
money manager urged companies to achieve net-zero emissions by 2050. And last
June, Texas passed
a bill that requires state entities to stop doing business with
companies that boycott the fossil-fuel industry. While BlackRock hasn’t argued
for such a boycott, many saw it as a warning shot at the firm and its peers,
which manage billions of dollars for Texas pensioners.
The BlackRock team has
gone to greater lengths in recent years to explain the reasoning behind
high-profile votes, such
as in the Exxon proxy fight. Index funds are required to report their
votes annually with the Securities and Exchange Commission every August, and the
team publishes reports on BlackRock’s website quarterly.
In a memo released earlier
this year, the stewardship team said climate-related shareholder proposals had
become more prescriptive and “intended to micromanage companies.”
The team said it would
likely support fewer climate proposals this year than last.
Write to Angel Au-Yeung at firstname.lastname@example.org