A version of this story previously ran in Financial Advisor IQ's sister publication, FundFire.
Pensions and endowments that invest in BlackRock index funds will soon have the option to cast their own shareholder votes, The Wall Street Journal reports.
The asset management giant said Thursday that starting next year, the firm’s largest investors will be able cast their own votes on shareholder ballot issues like board composition or executive pay. Until now, BlackRock, like most asset managers, usually casts votes on shareholder proposals on behalf of its investors, who generally don’t have much say in the matter.
“We believe clients should, where possible, have more choices as to how they participate in voting their index holdings,” the company says in a note to clients that was quoted by the Journal.
BlackRock says large investors will soon be able to pick and choose which shareholder resolution they want to vote on. Each investor can cast their own ballot based on their own values or rules or can follow the guidance of proxy advisory firms.
The changes impact about $2 trillion of investments in index-tracking funds that BlackRock manages in institutional accounts. That is roughly 40% of the $4.8 trillion of indexed equities the firm manages, the Journal says.
Some large investors have in the past been able to vote their own proxies on about $480 billion in index funds, the Journal says. Until now, though, the company lacked the technology to enable more widespread voting by investors.
In recent years, the firm has been building up its technology infrastructure to “sync up various parts of the shareholder voting ecosystem,” the Journal says. The aim is to make sure investor proxies can be delivered on time.
The shift comes after the Securities and Exchange Commission proposed a rule late last month that would establish new proxy voting disclosures for asset managers. Among those rules, institutional managers were required to disclose how they vote on executive compensation, as FundFire reported.
Some observers have questioned whether large asset managers like BlackRock have too much influence through their control of shareholder votes.
In 2019, Vanguard Group – the world’s second-largest asset manager, behind BlackRock – changed some of its voting procedures, giving outside managers that run the firm’s active equity funds the power to vote separately from the funds that Vanguard manages on its own.
BlackRock says it is looking at ways it can “expand proxy voting choice to even more investors,” including retail investors in index mutual funds and exchange-traded funds, the Journal reports.