ARTICLE: Lawmakers Seek to Curb Voting Power of BlackRock, Vanguard and Other Big Asset Managers

Expected GOP bill would require large money managers to give passive-fund investors a way to vote proxies

A group of Republican senators is looking to curtail the power big asset managers like BlackRock Inc. and Vanguard Group have over public companies.

In legislation to be introduced Wednesday, Sen. Dan Sullivan (R., Alaska) calls for voting choice to be made available to individual investors in passive funds when money managers own more than 1% of a company’s voting securities. 

Big asset managers like BlackRock, Vanguard and State Street Corp. STT -2.56% have grown rapidly in recent years, fueled by investors hoping that index-tracking funds can get them broader access to the market at a lower cost. Collectively, those three firms alone manage $20 trillion in assets. 

One unexpected consequence of their growth is the huge voting power these firms have accumulated, since they typically vote on behalf of investors. They have pushed companies to improve diversity, cut their climate emissions, and embrace other changes, sometimes drawing criticism from conservatives who say their votes represent a creeping liberal bias. 

“Look, this is not an attack against these companies or their executives from the perspective of what they have been able to achieve,” Mr. Sullivan said, highlighting passive funds’ lower fees and greater diversification as benefits to investors. The bill is co-sponsored by 11 other Republican senators. It so far doesn’t have any support from Democrats, who control the Senate.

Mr. Sullivan said he started looking at the asset managers after speaking with leaders in the Alaskan energy sector, who told him shareholder resolutions from climate activists had put pressure on their businesses.

In 2020, BlackRock Chief Executive Larry Fink steered the firm to consider environmental, social and governance risks as consequential as credit and liquidity risk. In a letter at the time, he said climate change “has become a defining factor in companies’ long-term prospects.” 

BlackRock and State Street declined to comment.

A Vanguard spokeswoman said the firm “believes it is important to give investors more of a voice in how their proxies are voted.” Vanguard “is committed to working with clients, policy makers, and others to help ensure long-term investor voices are heard,” she said. 

Mr. Fink has said that BlackRock’s positions are about long-term returns, not politics.

In October, BlackRock announced it was developing technology to expand proxy voting choices for its clients. Some institutional investors in BlackRock are now able to vote their shares. Mr. Fink stated in his annual letter this year to chief executives that despite “significant regulatory and logistical hurdles,” he wants a “future where every investor—even individual investors—can have the option to participate in the proxy voting process if they choose.”

By:  Angel Au-Yeung
Source: Wall Street Journal