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Lawmakers seek to limit voting power of BlackRock, Vanguard and other big asset managers

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A group of Republican senators seek to reduce the power of big asset managers like BlackRock Inc.

and Vanguard Group have on public companies.

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

Big asset managers like BlackRock, Vanguard and State Street Corp.

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have grown rapidly in recent years, fueled by investors hoping that index funds will give them broader market access at lower cost. Together, these three firms alone manage $20 trillion in assets.

An unintended consequence of their growth is the enormous voting power these companies have accumulated, since they usually vote on behalf of investors. They have pushed companies to improve diversity, reduce their climate emissions and adopt other changes, sometimes drawing criticism from conservatives who say their votes represent creeping liberal bias.

“Look, this is not an attack on these companies or their executives from the perspective of what they’ve been able to accomplish,” Sullivan said, pointing out that the lower fees and greater diversification of passive funds were advantages for investors. The bill is co-sponsored by 11 other Republican senators. He has so far no support from Democrats, who control the Senate.

Mr Sullivan said he first became interested in asset managers after speaking to energy executives in Alaska, who told him that shareholder resolutions by climate activists exerted pressure on their businesses.

BlackRock CEO Larry Fink said the company’s positions were about long-term returns, not politics.


Photo:

Shannon Stapleton/REUTERS

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

Fink said BlackRock’s positions were about long-term returns, not politics.

In October, BlackRock announced that it was developing technology to expand proxy voting choices for its customers. Select BlackRock institutional investors can now vote for their shares. Mr Fink said in his annual letter to CEOs this year that despite “significant regulatory and logistical hurdles”, he wants a “future where every investor, even individual investors, can have the opportunity to participate in the process. to vote by proxy if he wishes.

A BlackRock spokesperson said Wednesday that the company looks forward to “working with members of Congress and others on ways to help every investor, including individual investors, participate in proxy voting if they wish”.

For clients who choose to use BlackRock for proxy voting, the company “will continue to exercise its fiduciary responsibility to vote in the long-term economic interests of those clients.”

A Vanguard spokeswoman said the company “believes it’s important to give investors a greater voice in how their proxies are voted.” Vanguard is “committed to working with customers, policymakers and others to help ensure the voices of long-term investors are heard,” she said.

State Street declined to comment.

Write to Angel Au-Yeung at [email protected]

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