BlackRock
announced that starting in 2022, institutional clients invested in index strategies will have the option to direct BlackRock on how their index holdings are voted. By the firm’s estimate, 40% of the 4.8 trillion index equity assets they manage will be eligible for the new voting options. BlackRock Investment Stewardship will continue to vote for those clients that do not elect to specify voting preferences.
This is important because it could lead to diffusing the block-power of BlackRock’s votes – if many clients take BlackRock up on its offer,
it's possible that the change will lead to decreased support for say-on-pay proposals and increased support for ESG shareholder initiatives.
In addition, the SEC recently
proposed rules regarding enhanced disclosures for how investment managers vote. In recent years, BlackRock has become a focal point for shareholder advocacy for not pushing companies to change fast enough and being too lenient with boards. This policy could allow BlackRock to diffuse some of the criticism.
It will be worth watching if BlackRock discloses how many clients or which percentage of assets elect to direct voting and whether there are detectable changes in vote outcomes. Though other large investment management firms do not have similar programs in place, they may soon implement them if BlackRock’s pilot program proves popular.
