70 BlackRock Analysts Who Speak for Millions of Shareholders

The small group of analysts—BlackRock has about 18,400 employees, all told—looks after the interests of investors in the firm’s $4.6 trillion passive fund. This means weighing matters as diverse as executive compensation, Climate change And abortion access, Chief Executive Officer for the time being on the analysts’ calendar. He has the power to remove directors and make corporate decisions.

The team worked with 2,300 companies via email, phone calls and meetings last year and ultimately voted on 165,000 proposals in 17,000 shareholder meetings.

“It can sometimes feel like too much power,” said a former investment stewardship team analyst.

The increasing popularity of index funds has made their managers the largest shareholders in many public companies. This is especially true of BlackRock, the world’s largest investor. $10 trillion under management, The amount of equity managed by the firm for passive investors has more than tripled in the past decade.

BlackRock’s growth and the way it has sought to exert its influence has ranked corporate executives, particularly in the oil and gas industry. BlackRock’s stewardship team voted in favor of 47% of environmental and social shareholder proposals last year. Its support helped an active investor win board seats oil giant

Exxon Mobil Corporation

“We have a new group of monarchs, and they are the people who vote for the shares in index funds,” said Charlie Munger, vice chairman.

Berkshire Hathaway Inc.,

and business partner of Warren Buffett, said earlier this year,

a group of republican senators Last month a bill was introduced for individual investors in passive funds to have the option to vote on their shares, a move to curtail the power of BlackRock and its ilk.

pawn group and

State Street Corporation,

BlackRock’s two biggest rivals also have smaller stewardship teams. Vanguard has about 60 analysts focused on management. State Street does not disclose the size of its stewardship team, but a 2020 Columbia Law Review article on corporate governance estimated its head count at 12. The team has grown since then, a company spokesperson said.

BlackRock chief executive Larry Fink has said he wants to move to a place where all individual investors can vote for their shares. The firm has given that option to institutional investors who control some $2.3 trillion in assets. Investors representing about a quarter of that amount have taken the company up on offer.

For now, the stewardship team is looking for people who can’t or aren’t willing to vote for their own shares.

This plays an especially important role for index-fund investors because they “do not have the option to sell holdings in companies that are not performing as expected,” BlackRock said in a statement. February report On your priorities for the 2022 proxy season.

The investment management team is led by Sandy Boss, who previously spent two decades at McKinsey & Company Joining BlackRock in April 2020,

A BlackRock executive said its analysts are in seniority, and some are out of college. The team includes climate scientists, engineers and corporate-governance experts. They speak a total of 20 languages ​​and operate in 10 countries.

Each stewardship analyst is assigned to cover a specific industry. They dissect Company proxy reports and third party research, including MSCI Inc. Includes ESG ratings from and corporate-governance transparency scores from the nonpartisan non-profit Center for Political Accountability. Analysts also do their own research.

BlackRock said in a recent report that Team Institutional Shareholder Services Inc. And Glass subscribes to Lewis’ research, but does not “blindly follow” the voting recommendations of proxy-advisory firms.

The ISS helps the stewardship team screen for regular, non-controversial proposals. All others are sent to the management team for review. The team’s top priorities are board quality, strategy and financial flexibility, executive compensation, climate and human-resources issues.

Active investors who rock a company’s board sometimes pitch directly to the stewardship team. In some cases, they introduce their director candidates to members of the stewardship team – in person or, since the start of the pandemic, virtually.

The team recently met the candidates

McDonald’s Corp..’s

The board backed by Carl Icahn in his campaign to get the fast-food giant Change how it treats pregnant pigsAccording to a BlackRock executive. ,Mr. Icahn’s nominees lost.,

The team’s busiest season is mid-April to mid-June, when American companies hold their annual meetings. Prior to a meeting that includes controversial shareholder proposals, stewardship analysts will present a recommendation to the team’s executive committee. The committee will occasionally consult with BlackRock’s active-fund managers, who make their own voting decisions.

Voting decisions are made by the management team alone; Mr Fink and other BlackRock executives have no say. “They run the firm, we run the voting,” Ms Boss said in an interview.

That doesn’t mean that Mr. Fink has no influence.

In late 2020, Mr Fink convened a call with a few dozen or so members of the team in charge of the US proxy vote, according to people familiar with the matter. His message was clear: The team needed to do a better job of explaining their vote to company executives, the people said, especially around climate-related proposals.

Mr Fink’s main concern was around public perception. He didn’t want Wall Street to think BlackRock had gone too far in advancing an environmental agenda, the people said.

The firm’s stance on climate issues has angered officials and sided with states that are home to fossil-fuel companies.

West Virginia’s Treasury Investment Board stopped using BlackRock funds earlier this year after the money manager urged companies to achieve net-zero emissions by 2050. and last June, Texas passed a bill It requires state entities to stop doing business with companies that boycott the fossil-fuel industry. While BlackRock has not argued for such a boycott, many saw it as a warning shot for the firm and its peers, which manage billions of dollars for Texas pensioners.

The BlackRock team has gone into more detail in recent years to explain the reasoning behind the high-profile votes, like exxon proxy fight, Index funds are required to report their votes with the Securities and Exchange Commission in August each year, and the team publishes the report quarterly on BlackRock’s website.

In a memo issued earlier this year, the stewardship team said that climate-related shareholder proposals had become more directive and were “intended to micromanage companies.”

The team said it would support fewer climate proposals this year than last year.

Write to Angel Au-Young Angel.au-yeung@wsj.com