BlackRock's expectations go higher

type
Article
author
By Institute of Directors
date
21 Jul 2021
read time
2 min to read
Looking up into trees

BlackRock’s 2021 Investment Stewardship Annual Report (pdf), released this week, summarises the firm’s stewardship engagement and voting record for the reporting period 1 July 2020 to 30 June 2021. We highlight some key insights and trends below.

BlackRock and other large institutional investors play a role in shaping the global governance agenda. BlackRock has US$9.5 trillion in assets (up from $7.3 trillion a year ago) under management across the globe. It voted on more than 165,000 management and shareholder proposals across 71 voting markets.

See BlackRock’s Global Principles which cover seven key corporate governance themes relating to voting:

  • boards and directors
  • auditors and audit-related issues
  • capital structure, mergers, asset sales, and other special transactions
  • compensation and benefits
  • environmental and social issues
  • general corporate governance matters and shareholder protections
  • shareholder proposals.

BlackRock also has regional proxy voting guidelines including for Australian securities.

Record high – votes against director re-elections

BlackRock voted on more than 64,000 director elections with over 6,500 votes (up from over 5,100 the last reporting period) against director re-elections, including for the following reasons:

REASON VOTES 21/20 VOTES 20/19
Lack of board independence 2,200+ 1,700+
Lack of board diversity 1,800+ 1,500+
Over-commitment/ over-boarding 750+ 720+

When assessing independence, BlackRock considers a number of factors, including the balance of independent and non-independent directors and the average tenure of the overall board.

BlackRock places importance on ensuring that there is a diverse range of skills, experience and demographic characteristics amongst directors and that boards explain how their approach to board composition aligns with the company’s strategy and business model. When disclosure is insufficient, and where gender diversity remains inadequate (after being raised as an issue), BlackRock states that it will typically vote against the re-election of members of the committee responsible for nominating directors.

Director over commitment remains a key focus for BlackRock in light of the increasing workload and range of matters before boards. BlackRock is paying close attention to the number of boards on which directors serve to ensure they have the capacity to fulfill their responsibilities on each board. 

Even more engagement

BlackRock continues to prioritise engagement with company leaders (an activity that the firm had already doubled in 2019/2020). 

PRIORITY ENGAGEMENT 21/20 ENGAGEMENT 20/19
Climate and natural capital 2,300+ 1,200+
Strategy, purpose and financial resilience 2,200+ 1,400+
Board quality and effectiveness 2,100+ 1,500+
Company impact on people 1,300+ 750+
Incentives aligned with value creation 1,200+ 1,100+

The biggest change in engagement has been around climate and natural capital. BlackRock has also expanded what it terms its “climate focus universe” to over 1,000 carbon intensive public companies (that represent 90 percent of the global scope and greenhouse gas (GHG) emissions of the firm’s clients’ public equity holdings) – this is up from 440 companies in 2020.

See also BlackRock’s engagement priorities for 2021.

“We have been encouraged by companies’ responses to the turbulent events of 2020, as well as the coordinated efforts emerging between companies, governing bodies, and investors to accelerate progress on environmental and social risks and opportunities. We look forward to seeing how this continues to evolve in the year ahead.” 
- BlackRock Investment Stewardship Annual Report 2021

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