Keynote Presentation: BlackRock: A Passive Investor but Not a Passive Asset Manager
Speaker: John Roe, Managing Director and head of BlackRock Investment Stewardship,
Americas
KEY TAKEAWAYS
John Roe began by explaining why BlackRock is a passive investor but not a passive asset
manager. “As fiduciaries, our North Star is the financial well-being of our clients, many of whom
have a long-term investment time horizon. The stewardship function encourages companies to
address risks that may play out over years – even decades – not quarters,” Roe said. “We see
these issues as fundamental components of enterprise risk management that, over the long
term, have the potential to affect earnings, income and ultimately, shareholder value.”
When BlackRock has voting authority on behalf of investors, it focuses on a variety of issues
based in part on its long experience and expectations of how five factors affect risk and
company success over time:
- Board quality and effectiveness: Does the board have an appropriate composition and an
effective mix of skills?
- Strategy, purpose and financial resilience: Does the company have a solid plan and the
strength to navigate through adversity?
- Incentives aligned with value creation: Are executives motivated to act in the long-term
interests of shareholders?
- Climate and natural capital: Are the company’s disclosures consistent from year to year, and
is it making progress toward its goals? Disclosure consistency is a big concern for investors
and companies alike. (See BlackRock’s June policy statement.)
- Company impacts on people: Is the company able to attract and retain talent that can create
value over the long term?
Other highlights of Roe’s remarks:
- In Roe’s view, stakeholder capitalism simply recognizes that best serving the interest of
investors over the long term requires serving the interests of employees, customers and
other stakeholders, too. “We ask companies to consider both the short- and long-term
implications of their actions,” Roe said. “A short-term decision – a buyback, a reduction in
force or suspending certain expenses – can improve short-term results for investors, but
those results could come at a cost to investors’ returns over the long term.”
- BlackRock’s global stewardship team of 70 is “the biggest stewardship team anywhere, as
far as I know,” Roe said. The team is comprised of engagement and voting analysts and
operations, communications and policy experts. (For a third-party view of this function, read
the June 2022 Wall Street Journal article, The 70 BlackRock Analysts Who Speak for
Millions of Shareholders.)
- Despite having the bandwidth to hold 1,600 engagements with companies in the Americas
per year, BlackRock cannot always meet with companies upon request because its analysts
collectively steward more than 5,000 positions in the Americas. To improve your chances,
make sure you mention the specific issues you’d like to discuss – or better yet, propose an
agenda and include the names of corporate officers and/or director(s) who will attend the
meeting or call. The firm has less interest in an open-ended company update, although you
might get a meeting if BlackRock would like to know more about a given topic.
- BlackRock’s new Voting Choice program allows certain institutional clients to vote on all
proxy statement proposals based on their internal voting policies; take a “hybrid” approach
by voting proposals on specific topics, sectors or geographies (BlackRock votes on the other
proposals); or direct BlackRock to follow a voting policy from third-party proxy advisers. As
of May 31, 2022, approximately $530 billion of assets managed by BlackRock were voting
their own shares, with $120 billion of that new to the program since January 2022.