BlackRock Declares Independence from Proxy Advisors

The Shareholder Activist - BlackRock Declares Independence from Proxy AdvisorsMarty Lipton and David Karpview view as “significant” the announced effort by BlackRock Inc., which invests over $3.345 trillion of client assets, to take a direct interest in the governance of the companies in which they invest. According to this 1/21/2012 post, Disintermediating the Proxy Advisory Firms, at the Harvard corpgov blog:

“BlackRock CEO Larry Fink recently sent a letter to 600 companies which constitute some of the largest holdings in BlackRock portfolios. In the letter, BlackRock advises these companies to engage with BlackRock to address potential governance issues prior to engaging with proxy advisory firms. BlackRock encouragingly offers a “fair, respectful and in particular, open minded airing of views” in which it is “willing to support unconventional approaches as long as they can be expected to serve the interests of long-term shareholders.” In his letter, Fink specifically states that BlackRock reaches its proxy voting decisions independently of proxy advisory firms on the basis of internal guidelines that are “pragmatically” applied.”

We commend BlackRock’s leadership in recognizing the importance of a longterm investment perspective in corporate governance. This perspective is critical to generating sustainable value not only for those who entrust BlackRock to invest their savings, but also for corporate America and our economy as a whole.

How is this any different than how BlackRock has been approaching proxy voting for years? To my knowledge, they have never slavishly followed recommendations of proxy advisors. Anyone have additional information? Speaking to a BlackRock employee this morning; they don’t know what’s changed… maybe a more active press office.

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Posted in Corporate Governance, Featured, Shareholder Policies & Investor Regulations | 1 Comment

One Response to BlackRock Declares Independence from Proxy Advisors

  1. Sustainable value can only be enhanced by quality corporate governance. Monitoring “corporate behavior” within a framework of a cooperative spirit between management and shareholder creates a synergy which benefits all parties. Serving the interests of long-term shareholders is paramount. One can frame the issue metaphorically as follows: John Nash’s Equilibrium Theory (“A Beautiful Mind”) maintained that in relationships it must to be good for “me” (the shareholder), “you” (management), and then it is good for “us” (the companies we co-own). It’s a Win, Win, Win (a trifecta of sorts). Blackrock’s willingness to reach out to corporations that constitute huge components of their massive portfolio is both smart and courageous. It’s also good business. However, as James McRitchie aptly observes it’s not enough to just “talk the talk, Blackrock needs to walk the walk” From a psychologist’s perspective the basic human emotional drivers here are money and trust. Without trust vis a vis proper, sane, ethical stewardship of “our” money how can a company survive and prosper? Enron is the prime example etched on our collective cortexes of a complete breakdown and betrayal along these dimensions. 30,000 employees watched their retirement holding evaporate before their very eyes!