![]() A new generation of retail investorsīlackRock says that over 60 million people globally invest in retirement assets that will be eligible for what it calls "voting choice," and Broadridge Financial data suggests this trend will ultimately reach more younger Americans who are participating in the markets directly, as vehicles like ETFs become ubiquitous and zero-fee trading of equities becomes the norm. Indeed, one data point that helps explain why Berkshire Hathaway's Munger is voicing his concerns is that even Warren Buffett's company has seen a significant rise in support from shareholders for ESG measures, voting against Buffett and his board's stated position.Ĭompanies will be analyzing the data from the 2022 season and the issues where the voting power was most often used, how it influenced voting trends, and the overall percentage of shareholders who embrace the new power as a first step in understanding how proxy voting may be permanently altered. The 2021 proxy season saw a record number of shareholder proposals on ESG – and a record level of support from shareholders, averaging 32% approval, according to a recent Conference Board review and outlook. To be sure, as another annual meeting season begins, ESG issues will again be high-profile among shareholder resolutions and their success at annual meetings has grown. For example, in addition to a "benchmark view," it offers proxy guidance for perspectives including Taft-Hartley plans focused on labor, sustainability and climate policy. Historically, there has been a small portion of investors and institutional managers that offer a few select clients the ability to have their own view on voting, usually in the form of a specific voting policy, and proxy advisor Institutional Shareholder Services, which works with roughly 1,500 investment managers, has been expanding its offerings to accommodate what it is seeing in the market. The approach exists in the market to a degree already. But there may, in fact, be shareholders who are as likely to disagree as agree with how BlackRock is voting on ESG issues who want to have their voices heard. More institutional and retail investors are monitoring proxy issues and ESG issues, in particular, and having votes in the hands of actual share owners reduces the power of companies like BlackRock. It is too soon to assume that ESG investors will be the majority of asset manager clients wanting to vote shares. From BlackRock to black box in future votes We will see other fund managers moving in this direction," says Edmund Reese, chief financial officer at Broadridge Financial Solutions, which is a BlackRock technology partner on the new voting process. "BlackRock and its competitors can also try to use this pass-through voting service as a competitive advantage to their clients and potential clients. Pass-through voting may be on the margins in 2022 – it isn't clear what percentage of those institutional clients will actually take advantage of the new voting power – but it is a fundamental change in the future of shareholder influence that is expected to grow, and experts say is likely extend to BlackRock competitors, including Vanguard and State Street Global Advisors, and ultimately make its way down to retail investors. We believe clients should, where possible, have more choices as to how they participate in voting their index holdings," BlackRock said in announcing the initiative. "Our view is the choices we make available to clients should also extend to proxy voting. BlackRock has said that this year it will make the so-called "pass-through" voting - or what BlackRock calls "voting choice - available to approximately 40% of the $4.8 trillion in index equity assets, to start, with institutional investors in the U.S. This is one of the reasons that BlackRock is taking a new approach in proxy voting for some of its underlying investors this year: giving them back the votes to decide on their own. Berkshire Hathaway vice chairman Charlie Munger, never one to hold his tongue, recently blasted the power of index funds. Yet Vanguard Group founder Jack Bogle warned towards the end of his life that one of the greatest risks the fund giants faced was a creeping monopoly-like power over shareholder votes which would attract more scrutiny from politicians and regulators.
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