Two pension funds and Institutional Shareholder Services have lined up in support of the compensation of Laurence D. Fink, chairman and CEO, and other top executives at BlackRock Inc., while Glass Lewis is recommending institutional clients vote against ratifying the pay.
The C$171.4 billion ($132.4 billion) Ontario Teachers’ Pension Plan, Toronto, and the $126.6 billion Texas Teacher Retirement System, Austin, plan to vote in favor of the compensation in a non-binding proposal, their proxy-voting disclosures state.
Mr. Fink’s total pay was $25.8 million in 2015, up 8% from 2014. The pay of the five other top executives named in the proposal ranged from $6 million to $20.3 million in 2015.
ISS said in a report: “The CEO’s pay is approximately twice the median of ISS' peer group of similarly sized financial companies. The company's performance continues to outpace peers, though (total shareholder return) was negative for 2015 and underperformed the wider S&P 500 index. However, over the longer-term three- and five-year periods, the company outperformed both peers and the index. … Pay and performance have maintained a reasonable alignment for the year under review, and were essentially flat from the prior year.”
Glass Lewis said in its opposition: “We believe shareholders should have serious reservations about supporting the company’s compensation practices at this time. For the fourth year in a row, the company has received an ‘F’ grade in our pay-for-performance analysis. Though we recognize that the company is larger than certain industry peers, limiting this comparison to a certain extent, the company does not appear to have performed at a level commensurate with such outsized payments.”
Texas Teachers, Glass Lewis and ISS oppose the re-election of Abdlatif Yousef Al-Hamad as a director.
Glass Lewis and ISS both said in their reports Mr. Al-Hamad attended fewer than 75% of the board meetings. “We view this as a failure by this director to fulfill a fundamental responsibility to represent shareholders,” the Glass Lewis report said.
OTPP plans to vote in favor of the election of all 19 nominees to the BlackRock board.
The two pension funds, Glass Lewis and ISS support a company proposal enabling a shareholder or group of up to 20 shareholders that hold a combined 3% of BlackRock shares for three years to use the company’s proxy material to nominate up to 25% of the directors to the board.
All four entities oppose a shareholder proposal critical of BlackRock’s proxy voting on executive compensation at companies in which it invests, calling for a re-evaluation of BlackRock’s proxy-voting policies.
The proposal states BlackRock approved 99% of votes on CEO pay packages in the year ended June 30. “This level of support was higher than that of other investment managers; the average approval rating of 118 of these managers was 90%,” it said.
BlackRock opposes the proposal, saying in its proxy statement, “As a fiduciary to its clients, BlackRock has a duty to act in their best interests, including protecting and enhancing the value of their assets. Consistent with these duties, BlackRock has established a highly regarded investment stewardship team, comprised of over 20 corporate governance professionals, who work as part of BlackRock’s investment function to deliver value to BlackRock’s clients.”
Ed Sweeney, BlackRock director, corporate communications, said in an e-mail: ““Our independent corporate governance team takes a holistic approach to promoting sound governance practices that affect returns for our clients … including compensation. Executive compensation that is disconnected from company performance is a symptom of broader governance failures.
“When governance issues are identified in companies, we’ve found that engaging with senior management and directors is the most effective way to catalyze change,” Mr. Sweeney said. “Last year, we engaged with approximately 700 companies in the U.S. and executive compensation was a focus of 45% of those meetings.
“If we determine that issues will not be remediated through engagement, we vote against specific proposals and will generally also vote against the directors on related committees. For the 2015 proxy season, BlackRock voted against 16% of management proposals (globally) related to compensation and 162 directors serving on compensation committees.”
In its U.S. portfolio last year, Blackrock voted against management on executive compensation at 7% of companies, according to Blackrock’s “2015 Corporate Governance & Responsible Investment Report: Voting & Engagement Statistics” report.
BlackRock’s annual meeting is May 25 in New York.