Recognized as the world’s largest asset management company, BlackRock is urging its portfolio companies to allow shareholders to nominate directors, a process also known as proxy access. While BlackRock is leading the way in this most recent corporate governance campaign, the company has no plans to extend this right to its own investors at this time. This has put the company at odds with some of its leading shareholders, as well as its own corporate governance group.
BlackRock has become a leader in investor opinion, with high financial stakes in the majority of the leading companies in the United States. BlackRock has been proactive in their efforts to give shareholders a meaningful voice in corporate board elections. By engaging the public and private sectors, the company has significant influence on the voting process at annual meetings and has the ability to unseat entrenched board members and ensure a diverse presence in the boardroom.
Proxy Access to Shareholders
Three of BlackRock’s largest investors – Norges Bank Investment Management, Norway’s sovereign wealth fund, TIAA-CREF and T Rowe Price – support proxy access. In fact, T Rowe Price may grant director nomination rights to its shareholders within the year. In March, Norges Bank will likely be introducing proxy access to its portfolio companies. A spokeswoman for Norges Bank said that proxy access will be on their agenda for all future dealings with corporations in the United States. She added that United States companies are expected to take a leadership role in proposing proxy access when deemed appropriate.
According to the head of BlackRock’s Americas corporate governance team, proxy access is a shareholder right, one that is essential to ensuring director accountability. That said, BlackRock believes proxy access should only be granted to shareholders if a company demonstrated serious corporate governance failings. Maintaining the right to nominate directors helps to keep board members aware of shareholder concerns.
In most cases, BlackRock has voted in favor of director nomination rights for those shareholders who maintain more than three percent of a company for more than three years. This may not apply to small companies or if a shareholder has too much power.
Opponents of proxy access argue that the companies are in the best position to nominate directors. Others say that there are technical difficulties surrounding the verification of shareholders’ qualifications. BlackRock has said that proxy access is currently not a topic of priority for their shareholders, although they intend to have an ongoing dialogue with their shareholders about this governance issue, one that continues to evolve.
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