BlackRock clients with four choices: 1) choose and implement their own preferred voting policy (for institutional pooled vehicles); 2) take a hybrid approach to voting in accordance with BlackRock’s Invest- ment Stewardship policy or a third-party voting policy (for separately managed accounts); 3) choose from a group of third-party voting policies (institutional pooled vehicles and separately managed ac- counts); or 4) rely on BlackRock for all voting decisions. Te offering caught on, and according to BlackRock, as of December 31, 2023, 25% of eligible institutional equity clients representing more than $598 billion in index assets under management were participating in Voting Choice and electing to vote the proxy their preferred way.
From Institutions to Retail While shareholder voting rights have been a feature of modern public companies since the 1930s, it is believed that the rise of index investing, which favors a long-term investment horizon, helped to strengthen corporate governance policies. For example, while an actively managed mutual fund may hold a stock for only 18 months, BlackRock found that a comparable index fund may hold a stock for more than 20 years. If investors are holding onto stock for longer periods of time, they want to ensure that manage- ment’s policies are sufficiently aligned with shareholder interests. Voting the proxy is one way to achieve this alignment. It’s not just the holding period of these funds that impacted cor-
porate governance, but the fact that so many American households are now invested in these funds. In a speech that U.S. Securities and Exchange Commission (SEC) Commissioner Allison Herren Lee gave to the 2021 ICI Mutual Fund and Investment Management Conference, she noted, “It is estimated that in 2019, nearly 47% of US households owned funds, up from 6% in 1980. So, retail inves- tors today are increasingly relying on index funds to vote in annual corporate elections—making funds’ proxy voting practices more important than ever to our collective economic future.” (“Every Vote Counts: Te Importance of Fund Voting and Disclosure.”) According to BlackRock, today more than 100 million Ameri-
cans participate in the equity and debt markets via mutual funds, institutional funds, and index-tracking funds. It’s no surprise then that in February 2024, BlackRock enabled Voting Choice for more than three million retail accounts invested in its iShares Core S&P 500 ETF (a.k.a. IVV). Tese retail investors represent roughly $200 billion of the fund’s $399 billion in assets under management. Tis unique pilot program runs through December 31, 2024. Similar to the institutional Voting Choice platform, the pilot for
retail investors offers eligible IVV shareholder accounts the ability to either select from six third-party voting policies or to continue to have BlackRock vote on their behalf according to the BlackRock
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Investment Stewardship Voting Policy. Voting Choice offers three ISS proxy policies, including a Socially Responsible Investment Policy, a Catholic Faith-Based Policy, and a Global Board-Aligned Policy. Tere are also three Glass Lewis proxy policies offered, including a Benchmark Policy, a Climate Policy, and a Corporate Governance-Focused Policy.
First Time Voters? While the BlackRock Voting Choice pilot is a unique, first-time offering, it is certainly not the very first time that retail voters have been able to vote directly on proxy issues. Edward Greene, Managing Director, Georgeson, explains that if we define retail as simply the non-institutional investor, then in that context “many retail holders have always had the option to vote directly. For example, registered holders who hold in their own name directly through a transfer agent will receive the company’s proxy mate- rial. Similarly, many ‘street’ retail holders, who hold individual positions via a broker, receive a voting instruction form through a relevant intermediary and have traditionally been able to submit instructions for their shares.” What makes this pilot different from these prior offerings is that a subset of retail holders that have shares in IVV through Black- Rock will now have the opportunity to vote directly. According to the Head of Marketing and Strategy for Stakeholder Labs, Max Goldstein, “Retail investors have always been able to participate in proxy voting. However, Voting Choice tackles the challenge of enabling passive investors – those who invest through funds and ETFs—to engage in the proxy voting process.” Goldstein believes that BlackRock’s efforts are a commendable
step towards democratizing the investment process, “reflecting broader industry trends toward transparency, inclusivity, and ac- countability.” Greene agrees, commenting that this pilot launch, along with pass-through voting offerings that are launching with other fund managers such as Vanguard and State Street, align well with what is going on socially and politically across the country. Te trend is definitely shifting towards retail. Agnies Watson, Co-founder at Stockperks, explains that before the pandemic, retail investors comprised 10% of trading volume. Tis jumped to 20% during the pandemic, and according to Broadridge ProxyPulse™ 2023, as a group, retail ownership grew to 31.5% of the ‘beneficial’ shares Broadridge processed for the year, the highest percentage in the last five years. Jeff Lambert, Founder and CEO of retail shareholder verifica- tion and perks platform TiiCKER, believes that BlackRock was not only cognizant of the growth in retail trading volumes but was “clearly attracted to the much higher loyalty of retail investors.
niri.org/ irupdate
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