BlackRock's Larry Fink outlines expansion of proxy-voting program in letter to investors

BlackRock, the world's largest asset manager and a firm facing Republican-led divestment from several state funds, is expanding the eligibility for its 1-year-old proxy voting platform, Voting Choice.

In a letter sent late Wednesday to BlackRock clients and corporate executives, CEO Larry Fink acknowledged complaints lobbed at the company's investment stewardship and told investors that BlackRock is continually working to help investors engage in proxy voting more directly.

"It's clear there are investors who don't want to sit on the sidelines; they have a view on corporate governance, and they want a meaningful way to express those views,'' Mr. Fink said in the letter reviewed by Pensions & Investments. "While some pension funds have long been actively involved in corporate governance, we're working to make that easier and more efficient for a larger number of investors."

Voting Choice could "transform the relationship between asset owners and companies. And, if widely adopted, it can enhance corporate governance by injecting important new voices into shareholder democracy," wrote Mr. Fink, who also mentioned in his letter similar efforts by unnamed competitors.

Earlier Wednesday, Vanguard Group announced that it has started to "assess ways to provide individual investors the opportunity to participate more directly in the proxy voting process" and, in October, Charles Schwab announced it was piloting "proxy polling."

A spokesman for BlackRock said the timing of Mr. Fink's letter was a coincidence, not a response to developments at Vanguard or Schwab.

Now, nearly half of all index equity assets managed by the firm, including those owned by all public and private pension funds, are eligible to participate in Voting Choice, according to the letter.

Investors are using it more. In the third quarter, institutional investors committed an additional $157 billion to Voting Choice, bringing the total to $452 billion.

As of Sept. 30, BlackRock managed $3.8 trillion in total index equity assets. Eligible retirement plans serve more than 60 million people around the world.

Some of BlackRock's systematic active equity strategies, with total assets under management of $90 billion, are also newly eligible for Voting Choice.

Rather than rely on BlackRock's investment stewardship group to vote their shares, institutions using Voting Choice have a couple options.

Investors in certain pooled vehicles can have a high degree of control over their voting and can effectively do it themselves. Clients in separately managed accounts can make voting decisions based on topics or specific companies and leave all other voting decisions up to BlackRock.

A third option allows investors in certain pooled vehicles and separate accounts to choose a voting policy formed by a third-party proxy adviser. Mr. Fink also said in his letter that investors can now choose one of seven recently added Glass Lewis proxy voting policies, including an upcoming global Glass Lewis Governance-Focused Policy. The Glass-Lewis policies are additions to a list of seven Institutional Shareholder Services policies that were available when Voting Choice launched Jan. 1, 2022.

In addition to the effort to improve voting for institutions, BlackRock is continuing to work with Proxymity, a digital investor communications company based in the U.K. that helps retail investors cast shareholder votes. BlackRock said it expects to update investors on the pilot in 2023.

"My hope is that in the future, every investor — ultimately including individual investors — has access to voting choice, if they want it," Mr. Fink said in his letter.

BlackRock needs to be "realistic" about how much time some institutions, and especially retail investors, can or are willing to spend time wading through thousands of documents and contemplating every corporate governance decision. But investor interest is undeniable, according to Mr. Fink.

"There is no going back. The next generation of investors will increasingly demand to be heard. Technology has the potential to transform corporate governance in ways that we cannot fully imagine," Mr. Fink said.

Still, retail investors will need to be patient.

"The reality is that, until we have advances in technology, the costs of doing so would be many multiples of the cost of the fund itself. But we do believe, for example, that all investors should be able to pick from a range of voting policies to reflect their preferences and that it should be as easy to do so as it is to buy a mutual fund or ETF on your mobile phone today."