BlackRock at odds with its investors over shareholder rights

BlackRock, the world's largest asset manager, is pressing companies in its portfolio to give their shareholders a right to nominate directors, putting it in the forefront of the latest US corporate governance campaign - yet it is not a right that the company is planning to grant to its own investors.

By taking a more sceptical approach to the issue of so-called "proxy access" when it comes to its own board, BlackRock finds itself at odds not only with its in-house corporate governance team, but also with some of its large shareholders.

"While proxy access is an evolving governance consideration in the US, it is not a topic our shareholders have expressed as being a priority for us at this time," BlackRock said in a statement.

Norway's sovereign wealth fund, which is BlackRock's second-largest investor with a 7.2 per cent stake, and T Rowe Price, another top 20 shareholder, are both vocal supporters of so-called "proxy access" for long-term shareholders.

Also, Zach Oleksiuk, head of BlackRock's Americas corporate governance team, told a regulatory panel in February that "proxy access is a shareholder right and is fundamental to ensuring director accountability to long-term shareholders".

The right to nominate directors has become an issue at corporate annual meetings in the US this spring, with public pension funds such as the New York City retirement system and the California public employees' pension fund Calpers proposing the measure at dozens of companies. T Rowe Price and TIAA-CREF are among the large asset managers to have joined BlackRock in saying they will support proxy access.

T Rowe Price - which like BlackRock is a publicly traded US company - said its board would discuss granting director nomination rights to its shareholders later this year.

BlackRock believes shareholders should only nominate directors where a company showed serious corporate governance failings, but holding the right in reserve was a way of making sure boards paid attention to shareholder concerns, Mr Oleksiuk said in February.

BlackRock funds control more than 4 per cent of BlackRock shares, making it a top 5 shareholder.

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"BlackRock's independent corporate governance team generally supports proxy access proposals but we have not proposed it, we don't demand it and we have also voted against it," the company told the Financial Times.

Norges Bank Investment Management, the Norwegian sovereign wealth fund, said in March that it wanted its portfolio companies to introduce proxy access.

A spokeswoman said: "The topic of proxy access is on our agenda when speaking to all US companies . . . In the absence of a universal rule, we will encourage boards of US companies to demonstrate leadership on this governance reform and to propose proxy access at appropriate terms."

General Electric, Citigroup and Bank of America are among the large companies to have agreed to introduce proxy access rights for their investors. The idea has been implemented at fewer than 1 per cent of US companies so far, however, and several large asset managers, including Fidelity, remain opposed.

Some opponents argue that companies themselves are best placed to pick director nominees, while others say there are technical difficulties around verifying which shareholders ought to qualify for nomination rights.

In its statement, Blackrock said: "We will continue our dialogue with our shareholders on this and other important governance measures."

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