The CEO of Blackrock, one of the largest managers of equities, was reported by Bloomberg recently to have sent a letter to 600 of its biggest holdings stating that Blackrock “seeks to engage in a dialogue” with these public companies to address issues that will be raised at upcoming stockholder meetings. “We think it is particularly important to have such discussions - with us and other investors - well in advance of the voting deadlines for your shareholder meeting and prior to any engagement you may undertake with proxy-advisory firms.”
Let’s make believe that 80% of the 600 companies wanted to take Blackrock up on the offer, and let’s assume 75% of those have their annual meetings from April through June, and each have a half hour telephone call with Blackrock. That’s a total of 180 hours of phone calls. Now let’s assume that a member of Blackrock’s global Corporate Governance and Responsible Investment (CGRI) team spends an additional half hour before the call (as preparation) and an additional half hour after the call (as follow-up). Now we are up to 540 hours. Let’s assume half of the 20-member CGRI team spends three hours of each day on this task. So within 18 days, a little under three weeks, they should be able to handle the task. :-)
I don’t know what prompted the CEO’s letter. It appears consistent with Blackrock’s philosophy of engagement historically. They say they already engage with over 1,000 companies every year (10%-15% of its investments).
It's interesting to note that according to Blackrock, for the 37 U.S. incorporated companies that did not get majority shareholder support on the "say-on-pay" vote during the past proxy season, Blackrock voted “for” pay for half and voted “against” pay on half, and it engaged with close to three quarters of these companies. Michele Edkins, the global head of the CGRI team, is quoted in the The Financial Times as saying "remuneration is a pretty small piece of the puzzle." Factors to blame for value destruction are board issues such as "succession planning, poor board decision-making, not having the right people capable of the job." For example, it appears Blackrock voted “for” pay at the Nabors Industries annual meeting last year (1 of the 37) but withheld votes against a director.
In case you are interested and in the San Francisco area on Monday evening, January 30, 2012, you can hear from three members of the CGRI team. There is a Q&A too.
The Financial Times earlier this year interviewed Ms. Edkins:
Ms. Edkins points to the difficulties of voting across borders, describing the process as “a nightmare.” “It’s incredible. In a day and age when your telephone can tell you exactly where you are in the world, you can’t vote end to end and get confirmation that has happened through a custodial voting chain.” Global investors need to step up their efforts to simplify the voting instruction process and make it electronic, she concludes.
Proxy plumbing is a global issue.