This summer, the world’s lar♈gest asset manager, BlackRock, that it was considering a policy change for its💞 biggest exchange-traded fund (IVV), which tracks stocks in the S&P 500 Index.
Beginning next year, ordinary retail investors — folks like you and me — would get more 🎶control over how the shares corresponding to their funds are voted 🃏in corporate annual meetings.
That’s a big deal, especially since these votes have become increasingly politicized —with encouragemen🥃t from Biden administration regulators.
The new BlackRock voting policy is clearly designed🐽 to blunt that the invest🌼ing giant has been exploiting its shareholder voting power to push companies toward environmental and social policy positions preferred by the progressive left.
BlackRock’s principal competitors Vanguard and State Street already allow for customized voting for some institutional investors, but this is ꦿthe first time such policies have been extended to everyday in♛vestors — and others are likely to follow suit.
It’s not hard to see why. The “Big Three” asset managers have been at the fꦓorefront of the ESG movement — that’s environmental, social, and governance — pushing corporations to pursue environmental goals, “racial justice,” and other left-oriented poli🐓cy objectives.
And these asset managers’ proclivity to endorse left-wing ideas on corporate proxy ballots has now, unsurprisiꦿngly, prompted a conservative blowback.
Last fall, that it was yanking $2 billion in assets from BlackRock funds, citing the investment manager’s env🎃ironmental and social activism.
This spring, 21 💦state attorneys general to BlackRock, State Street, and several other asset managers warning that their pursuit of ESG goals at the expense of financial returns may violate their fiduciary duties to investors and other state and federal laws.
In July, the leadership of the House Financial Services Committee held looking into environmental and social investing. (I wa🌳s among those called to .)
Last month, GOP presidential caꦕndidate Vivek Ramaswamy the Big Three asset managers “arguably the most powerful cartel in human history.”
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Ramaswamy’s “cartel” charge is probably somewhat overblown.🍌
The three asset managers for investors’ assets.
And the privately owned Vanguard has been to support environmental and social shareholder p♍roposals than its two𓄧 big publicly-owned competitors, which are under substantial pressure from politically oriented investors like the New York state and city pension funds.
Still, these three investing fund families♕ wield extraordinary influence over corporate America.
Collectively, the “♚Big Three” asset managers of the shares in the S&P 500, which represents some 85% of the total U.S. stock market.
And you don’t 𒉰have to look far to see at least some collusion😼.
BlackRock and State Street are among the financial firms belonging to the “” initiative, which tries “to ensure the world’s largest corporate greenhouse gas emitters take⛎ necessary action on climate change.”
Vanguard was formerly a member, too, but withdrew🐷 from the initiative last December, which is perhaps why it was not targeted by those state🐷 attorneys generals.
In addition to legal and political risks, the increased attention on asset managers’ progressive activism obviously affects their brands, too, and may help explain why Vanguard has been closing ground on industry lea🤪der BlackRock.𓆉
No wonder BlackRock tensions.
So, what to make of the new move to give individual investors more “voting choic🌃e”?
Well, empowering individual investors to align their ♚stock holding��s with their own preferences is good.
But note that BlackRock isn’t actually proposing to allow ordinary investors to vote on all the shares in companies held by its IVV fuꦇnd.
Suꦰch an idea would be administratively unwieldy if not impossible, and the whole reason why people like index funds is𒁃 that they offer a low-cost way to capture stock-market returns without having to research individual companies or portfolio managers.
Instead, ordinary investors in the BlackRock fund can shift control of their shareholder voting from BlackRock itself to one of six “voti𒆙ng plans” developed by a “proxy advisory firm.”
Never heard o💛f tꦆhem? Proxy advisors assist institutional asset managers in voting their shares.
With just two dominant firms in the market ꦦ— ISS and Glass Lewis — they also wield enormous control over corporate shareholder votes as well as possess clear agendas.
Indeed, proxy advisors have been more likely to recommend voting with progress🐽ive activists than💙 even the Big Three asset managers.
Additio💧nally, the top proxy advisors remain unregulated, and they’re both foreign-owned — ISS by Germans, and Glass Lewis by Canadians.
Those foreign 💯owners follow United Nations-led efforts൩ like the and the , which sound harmless enough but essentially work to ensure that your investment dollars are led by progressive policy priorities, not financial returns.
BlackRock deserves praise for its initial steps, no matter how m𓆉odest, in finally empowering investors rather than activists.
But there is still much work to be done to ensure every dollar investe🌃d maximizes its potꦚential return.
After all, individual investor assets must be managed for their financial benefit, not to concentrate ever more power in t🐻he hands of BlackRock CEO Larry Fink and his progressive agenda.
James R. Copland is a senior fellow with and director of legal policy for the Manhattan Institute.
