BlackRock Inc

BlackRock Inc: Proxy Score 59

BlackRock Inc

BlackRock Inc: Before You Vote Your Proxy

BlackRock Inc (NYSE:BLK) provides investment and risk management services to institutional and retail clients across the world. Its product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments..

Their annual meeting is coming up on May 25, 2016. ProxyDemocracy.org had collected the votes of three fund families when I checked. Vote AGAINST pay plan, compensation committee, director with poor attendance; FOR Proxy Access, Report on Proxy Voting and Executive Compensation. I voted with the Board’s recommendations 59% of the time. View Proxy Statement.

Read Warnings below. What follows are my recommendations on how to vote the proxy in order to enhance corporate governance and long-term value.

BlackRock Inc: ISS Rating

From Yahoo! Finance: BlackRock, Inc.’s ISS Governance QuickScore as of May 1, 2016 is 3. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 5; Compensation: 2. Brought to us by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures. That gives us a quick idea of where to focus: Board and Shareholder Rights.

BlackRock Inc: Compensation

BlackRock Inc’s Summary Compensation Table shows the highest paid named executive officer (NEO) was chair and CEO Laurence D. Fink, at $25.8M. I’m using Yahoo! Finance to determine market cap ($58.5B) and Wikipedia’s rule of thumb regarding classification. Ellie Mae is a large-cap company. According to the Equilar Top 25 Executive Compensation Survey 2015, the median CEO compensation at large-cap corporations was $10.3 in 2014, so pay was considerably under that amount. However, BlackRock Inc’s shares underperformed the S&P 500 over the most recent one but outperformed during the most recent two, five and ten year periods.

Egan-Jones Proxy Services takes various measures to arrive at a proprietary rating compensation score, which measures  wealth creation in comparison to other widely held issuers. “Needs Attention” is the rating given. On the actual compensation advisory vote, Egan-Jones concludes:
Egan-Jones

We believe that shareholders cannot support the current compensation policies put in place by the Company’s directors. Furthermore, we believe that the Company’s compensation policies and procedures are not effective or strongly aligned with the long-term interest of its shareholders. Therefore, we recommend a vote “AGAINST” this Proposal.

Because of the issues above, especially pay far above median, I voted ‘Against’ the pay package and compensation committee members David H. Komansky, Murry S. Gerber, James Grosfeld, Sir Deryck Maughan, Cheryl D. Mills and Gordon M. Nixon.

BlackRock Inc: Accounting

I have no reason to believe the auditor has rendered an inaccurate opinion, is engaged in poor accounting practices, or has a conflict of interest — so voted to confirm.

BlackRock Inc: Board Proposals

As mentioned above, I voted against the pay package and compensation committee.  I see Egan-Jones recommended voting against Abdlatif Yousef Al-Hamad “due to high absenteeism,” since the nominee attended less than 75% of all the meetings of the Board and of the committees during the fiscal year that has ended. That logic works for me. You can’t be an effective director if you don’t attend the meetings.

BlackRock Inc: Shareholder Proposals

#4 Proxy Access. This board proposal is for proxy access lite, in an attempt to avoid adopting a more robust form of proxy access that may be proposed by shareholders. Key provisions include allowing a small group of up to 20 shareholder owning 3% of common stock over at least 3 years to place nominees totaling up to one quarter of the directors then serving. Proxy access is the most important shareholder right that has to be won through a proxy vote. I’ve been working on this issue since before filing a petition with the SEC in the summer of 2002, which the Council of Institutional Investors said reinvigorated the debate. I guess proxy access lite is better than no proxy access, although it would probably make winning real proxy access more difficult. Egan-Jones recommends ‘For,” and I assume just about everyone will vote in favor. I voted ‘FOR.’

#5 Report on Proxy Voting and Executive Compensation. This proposal comes from the Stephen M. Silberstein Revocable Trust. I love it and plan a few similar proposals. BlackRock says it will oppose advisory pay votes in specific cases, including when: “We determine that compensation is excessive relative to peers without appropriate rationale or explanation, including the appropriateness of the company’s selected peers.” Yet, in the prior year, they voted to approve executive pay 99% of the time. BlackRock has some explaining to do.

Here’s Why We Can’t Rely on Shareholders to Fix CEO Pay by Sarah Anderson provides readers of The Nation a little more explanation. Egan-Jones recommends ‘FOR.’ If you agree, vote ‘FOR’ like I did. 

BlackRock Inc: CorpGov Recommendations Below – Votes Against Board Position in BoldProxy Insight

In addition to ProxyDemocracy.org, Proxy Insight reported the votes of Colorado PERA (COPERA), which voted almost the same as me (except on Nixon) and Texas Teachers (TRS), which voted the same as CBIS, except on the auditor.

# PROPOSAL TEXT CorpGov/COPERA CALVERT CBIS/TRS TRILLIUM
1a Elect Director Abdlatif Yousef Al-Hamad Against Against Against Against
1b Elect Director Mathis Cabiallavetta For For For For
1c Elect Director Pamela Daley For For For For
1d Elect Director William S. Demchak For For For For
1e Elect Director Jessica P. Einhorn For For For For
1f Elect Director Laurence D. Fink For For For For
1g Elect Director Fabrizio Freda For For For For
1h Elect Director Murry S. Gerber Against For For For
1i Elect Director James Grosfeld Against For For For
1j Elect Director Robert S. Kapito For For For For
1k Elect Director David H. Komansky Against For For For
1l Elect Director Deryck Maughan Against For For For
1m Elect Director Cheryl D. Mills Against For For For
1n Elect Director Gordon M. Nixon Against / For For For For
1o Elect Director Thomas H. O’Brien For For For For
1p Elect Director Ivan G. Seidenberg For For For For
1q Elect Director Marco Antonio Slim Domit For For For For
1r Elect Director John S. Varley For For For For
1s Elect Director Susan L. Wagner For For For For
2 Advisory Vote to Ratify Named Executive Officers’ Compensation Against Against For Against
3 Ratify Deloitte & Touche LLP as Auditors For For Against/For For
4 Provide Proxy Access Right For For For For
5 Report on Proxy Voting and Executive Compensation For Against Against For

 

SharkRepellent.net

BlackRock Inc: Issues for Future Proposals

Looking at SharkRepellent.net for provisions unfriendly to shareowners:

  • No action can be taken without a meeting by written consent, unless approved in advance by the board.
  • Shareholders cannot call special meetings.
  • Supermajority vote requirement (80%) to amend certain charter provisions.

BlackRock Inc: Mark Your Calendar

Stockholders who, in accordance with the Exchange Act Rule 14a-8, wish to present proposals for inclusion in the proxy materials to be distributed by us in connection with our 2017 Annual Meeting must submit their proposals to BlackRock’s Corporate Secretary on or before December 16, 2016.

Warnings

Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime).I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.

Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.

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