The Scoop
BlackRock called off scheduled engagement meetings with companies after the Securities and Exchange Commission last week walked back guidance that had allowed big index-fund investors to privately press companies on “social and public interest issues” without running afoul of the rules, people familiar with the matter said.
It’s a technical change with wide-ranging repercussions that could hasten big investors’ retreat from pushing progressive corporate policies. BlackRock declined to comment. It’s also the latest sign, as we wrote about last week, that the conventional hall monitors are now on the back foot.
In this article:
Rohan’s view
The SEC’s actions may be targeting big passive holders, but the real losers are companies and executives. Executives never loved having to deal with what they felt like were impositions from supposedly “passive” shareholders but, until recently, were relatively powerless to object.
But the new rules simply stop Vanguard, BlackRock and State Street from discussing why they’re voting or not voting a certain way, leaving companies in the dark about whether they’ll be able to reelect directors, approve executive compensation. Even reincorporation or bylaw changes — two hot button issues right now — are subject to shareholder approval, making input from big shareholders even more crucial.
The View From Jessica McDougall
“With passive investors potentially decreasing engagement, companies may bear the brunt of this change, as they miss out on valuable feedback from their largest long-term holders and lack context for proxy voting decisions,” Longacre Square’s corporate governance chair Jessica McDougall told me (McDougall spent more than ten years at TIAA and BlackRock.)
Notable
- ISS walked away from DEI metrics in the wake of Trump’s executive orders. The proxy advisor is a very influential voice in how passive investors like BlackRock decide to vote at thousands of companies.
- A much-vaunted McKinsey study which found that diversity increases profits has found little real-world traction since it debuted, WSJ columnist James Mackintosh noted last summer.