BlackRock 2021 Proxy Votes Public Benefit Corporation

BlackRock 2021 Proxy Votes

BlackRock 2021 annual meeting is May 26, 5 AM Pacific Time. To attend, vote, and submit questions during the Annual Meeting, visit here with your control number. I recommend voting in advance. To enhance long-term value. Vote AGAINST Ford, Einhorn, Johnson, Mills, Nixon, Domit, Pay, Auditor. Vote FOR Convert to Public Benefit Corporation. 

BlackRock is a publicly owned investment manager. It also provides global risk management and advisory services. Most shareholders do not vote.  Reading through 103+ pages of the proxy takes time, but 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 25 years and trust my judgment, skip 8 minutes of reading. See how I voted my ballot. Voting will take you only a minute or two. Every vote counts.

I voted with the Board’s recommendations 59% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A).

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 2021: ISS & Sustainalytics Ratings

From the Yahoo Finance profile page: BlackRock, Inc.’s ISS Governance QualityScore as of April 30, 2021, is 5. The pillar scores are Audit: 1; Board: 5; 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 Board, Shareholder Rights, and Compensation.
Sustainalytics’ rates ESG score is moderate controversy level.

BlackRock 2021: Board Proposals

1. Directors

Egan-Jones Proxy Services recommends in favor of all except Murry S. Gerber.  Because I voted against pay, I also voted against compensation committee members: William E. Ford (Chair), Jessica P. Einhorn, Margaret “Peggy” L. Johnson, Cheryl D. Mills, Gordon M. Nixon, Marco Antonio Slim Domit.

Vote: AGAINST Ford, Einhorn, Johnson, Mills, Nixon, Domit.

2. Executive Compensation

BlackRock 2021’s Summary Compensation Table shows the highest paid named executive officer (NEO) was CEO Laurence D. Fink at $27.4 M. I’m using Yahoo! Finance to determine market cap ($133 B). I define large-cap as $10B, mid-cap as $2-10B, and small-cap as less than $2B. BlackRock is a large-cap company.mylogiq_logo

According to MyLogIQ, the median CEO compensation at large-cap corporations was $13M in 2020. CEO Laurence D. Fink at  $27.4M is more than twice that amount.  BlackRock shares performed similar to the Nasdaq in the most recent one- and two-year time periods but lagged over the most recent five-year time period. The ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees was 186 to 1. Egan-Jones Ratings

Egan-Jones Proxy Services found pay aligned with the long-term interest of its shareholders. They recommend voting For. Given my concern for the growing wealth disparity and pay for performance, I could not in good conscience vote that way.

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 and Touche served for 19 years. No other issues appear significant.

Vote: AGAINST

4. Approval of Amendment to Charter

Provide shareholders with (i) the right to call a special meeting, (ii) eliminate certain supermajority vote requirements, and (iii) eliminate provisions related to “Significant Stockholder” that are no longer applicable. I proposed getting rid of the supermajority vote standards in 2019. These are all good initiatives, which I proposed to them when PNC was still a “significant shareholder.”

Vote: FOR

Black Rock 2021: Shareholder Proposals

5. Convert to Public Benefit Corp

This proposal comes from me, James McRitchie, written by experts at The Shareholder Commons, so of course, I voted FOR. Egan-Jones recommends Against parroting Board arguments.

The purpose of the Proposal is to better address the inevitable tension between shareholder interests and stakeholder concerns. The Proposal’s suggested resolution—conversion to a benefit corporation—is celebrated by Leo Strine, the former Chief Justice of Delaware. Chief Justice Strine argues conversion to benefit corporation status resolves the contradiction between company-first shareholder primacy and the need to account for the full impact of business operations:

So how to resolve this legal impasse? A recent innovation offers a sensible answer. … [The benefit corporation] puts legal force behind the idea that a business should have a positive purpose, commit to do no harm, seek sustainable wealth creation, and treat all its stakeholders with equal respect.

BlackRock’s opposition statement fails to consider the gap between what it can do to address stakeholder interests as a conventional corporation and what it could do as a PBC.

Most BlackRock shareholders are diversified investors who depend on an economy that succeeds for everyone over the long term. As a PBC, BlackRock could better consider the long-term risks to multiple stakeholders and the overall economy, as well as to our Company. BlackRock would be incentivized to protect you as a diversified shareholder by limiting activities that undermine healthy systems necessary for a successful economy. These social and environmental costs on the economy are not insignificant. At $2.2 trillion a year, they equal more than 2.5% of global GDP. While BlackRock may increase its isolated return to shareholders slightly by applying a company-first shareholder primacy model, its diversified shareholders will pay for the costs it externalizes.

As a PBC, BlackRock would have a clear advantage with regard to its customers. Investing with BlackRock would be like hiring a financial advisor who owes you a fiduciary duty instead of one more concerned with how much they profit from you. (See also exempt solicitation.)

Vote: FOR

BlackRock, Inc. 2021 CorpGov RecommendationsProxy Insight

Proxy Insight reported the votes of Australia’s Local Government Superannuation Scheme when I last checked. They vote For most items but abstained on the last two.

In looking up a few funds in our Shareowner Action Handbook, Calvert vote Against Pay, and our PBC proposal.

CBIS voted Against the auditor; For all other items. Norges voted For all items. NYC Pensions voted Against Einhorn, Ford,  Johnson, Mills, Nixon, Domit, pay, PBC. Norges voted Against Domit and PBC. Trillium voted Against Alsaad, Freda, Gerber, Mills, Nixon,  and pay; For all other items.


CorpGov Votes:

  1. Directors: AGAINST Ford, Einhorn, Johnson, Mills, Nixon, Domit.
  2. Executive Pay: AGAINST
  3. Auditor: AGAINST
  4. (a, b, c) Approval of Amendment to Charter: FOR
  5. Convert to Public Benefit Corp: FOR

BlackRock 2021: Issues for Future Proposalsinsightia

Looking at insightia for anti-shareholder provisions:

  • No requirement to separate CEO and Chair
  • Shareholders lack the right to hold a special meeting
  • Supermajority requirements to change bylaws

Black Rock 2022: Mark Your Calendar

Assume the 2022 AGM is held within 25 days of the anniversary of this year’s Meeting. If so, BlackRock must receive shareholder proposals for the 2022 Meeting by 12/17/21, but not before 11/17/21.

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Climate Risk – Walden Moves BlackRock

Warnings

Be sure to vote for each item on the proxy. Any items left blank get automatically 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.” Peer groups are often chosen by aspiration. The “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average.” However, corporations live in the real world. All CEOs are above average. Ignoring that fact partly explains why their collective pay spiraling out of control. We need to slow the pace of money going to the 1% or our economy will fail to serve the majority. 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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