BlackRock 2020 Corporate Purpose

BlackRock 2020: Corporate Purpose

BlackRock 2020 annual meeting is 5/14/2020 at 5AM Pacific virtually by entering the eligible shareholder’s 16-digit control number found on the proxy card. To enhance long-term value: Vote AGAINST Einhorn, Ford, Gerber, Johnson, Mills, Nixon, Slim Domit, Auditor, & Pay. Vote FOR Report Corporate Purpose.  See list of all virtual-only meetings maintained by ISS.

BlackRock, Inc. is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors including corporate, public, union, and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, and banks. Reading through 100 pages of the proxy takes too much time for most. Your vote could be crucial. Below, how I voted and why.

If you have read these posts related to my portfolio and proxy proposals for the last 24 years and trust my judgment, skip the 7 minute read. See how I voted in my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 50% of the time. View Proxy Statement via SEC’s EDGAR system (search DEF 14A in Filing Type). 

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 2020: ISS Ratings

From the Yahoo Finance profile: BlackRock, Inc.’s ISS Governance QualityScore as of December 5, 2019 is 4. The pillar scores are Audit: 1; Board: 4; Shareholder Rights: 5; Compensation: 6.

Corporate governance scores courtesy of Institutional Shareholder Services (ISS). Scores indicate decile rank relative to index or region. A decile score of 1 indicates lower governance risk, while a 10 indicates higher governance risk. We need to pay close attention to the shareholder rights and compensation.

BlackRock 2020 Proxy Voting Guide: Board Proposals

1. BlackRock 2020 DirectorsEgan-Jones

Egan-Jones Proxy Services recommends Against (withhold) 1E) Jessica P. Einhorn, 1G) William E. Ford, 1I) Murry S. Gerber, 1J) Margaret L. Johnson, 1L) Cheryl D. Mills, 1M) Gordon M. Nixon, and 1O) Marco Antonio Slim Domit. Mr. Gerber has served for 10 years or more, so should no longer be considered independent nor should he serve on compensation, audit or nominating committees. The other directors recommended against are on the compensation committee and should be held accountable for poor long-term incentives for CEO pay.

Vote: AGAINST 1E) Jessica P. Einhorn, 1G) William E. Ford, 1I) Murry S. Gerber, 1J) Margaret L. Johnson, 1L) Cheryl D. Mills, 1M) Gordon M. Nixon, and 1O) Marco Antonio Slim Domit.

2. Executive Compensation

mylogiq_logoBlackRock 2020 Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO/Chair Laurence D. Fink at $24.3M. I’m using Yahoo! Finance to determine market cap ($70.5B) and I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. BlackRock is a large-cap company.

According to MyLogIQ , the median CEO compensation at large-cap corporations was $12.2M in 2019. BlackRock shares underperformed during the last one, two and five year time periods. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 182:1.

Egan-Jones Proxy Services recommends AGAINST:

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

Given far above median pay, underperformance and my general concerns about inequality, I voted AGAINST.

Vote: AGAINST

3. Ratification of Independent Auditor

I have no reason to believe the auditor engaged in poor accounting practices or has a conflict of interest. Egan-Jones recommends voting against the auditor if they served for seven years. Independence becomes compromised by that time. Deloitte & Touche, LLP has served more than seven years. No other issues appear significant.

Vote: AGAINST

BlackRock 2020 Shareholder Proposal

4. Shareholder Proposal: Report on Statement of Purpose

This proposal was submitted by Trio Foundation, represented by As You Sow, and is co-sponsored by Chela Blitt and James McRitchie, the publisher of CorpGov.net. The proposal requests a report based on how our BlackRock’s governance and management systems should be altered to fully implement the BRT Statement of the Purpose of a Corporation, signed by Larry Fink.

Mr. Fink talks the good talk, but BlackRock does not walk the walk. BlackRock says it favors addressing ESG issues. Unfortunately, it has the highest ratio of coal investments among the ten largest fund managers. It also has among the poorest voting record on ESG issues. BlackRock is taking advantage of investor greenwisher by greenwashing its statements.

If investors knew how BlackRock votes, there would be Mutual Fund Wars Over Fees AND Proxy Votes. I helped file this proposal, aimed at exposing BlackRock’s hypocrisy. If BlackRock writes the requested reports, its customers will demand changes.

This is a new proposal; Egan-Jones recommends Against. However, it just may be the most important proposal to vote FOR this season, since changing BlackRock could just change the industry.

Vote: FOR

BlackRock 2020 CorpGov RecommendationsProxy Insight

Proxy Insight reported the following as of when I last checked. They may have updated by the time I post this.

 Looking up a few funds announcing votes in advance, NYC Pensions voted FOR all items except Mae C. Jemison and Sherilyn S. McCoy. I wish they posted the reasons. 

CorpGov Votes:

  1. Directors: AGAINST 1E) Jessica P. Einhorn, 1G) William E. Ford, 1I) Murry S. Gerber, 1J) Margaret L. Johnson, 1L) Cheryl D. Mills, 1M) Gordon M. Nixon, and 1O) Marco Antonio Slim Domit.
  2. Auditor: AGAINST
  3. Executive Pay: AGAINST
  4. Report on Statement of Purpose: FOR

BlackRock 2020: Mark Your Calendar

Shareholders who wish to present proposals for inclusion in the proxy materials to be distributed by us in connection with our 2021 Annual Meeting of Shareholders must submit their proposals to BlackRock’s Corporate Secretary on or before December 10, 2020.

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,” chosen by aspiration. 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. For more on the subject, see CEO Pay Machine Destroying America.

   

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