By Lane Hagar
Following the United States Supreme Court decision in Citizens United v. FEC, unprecedented amounts of corporate money flooded the political landscape. Political spending, both campaign and lobby spending, poses a risk for companies because they may attach themselves to a candidate or an issue that is generally unpopular and that might cause consumers to stop purchasing their products. In fact, it has been shown that a company’s reputation with the public correlates directly with its financial success.
Because of the risk to companies’ bottom lines from supporting hot-button issues, investors have a real interest in knowing who and what companies are supporting with their political spending. That’s why investors for years have been bringing shareholder resolutions calling for access to lobbying and campaign expenditures from companies, to guarantee they have the information they need to make wise investments.
When it comes to political spending shareholder resolutions, mutual fund companies are problematic because they tend to own a large portion of the common stock in major corporations and they have generally voted against or abstained from voting for shareholder resolutions calling for this increased transparency. These votes make a big difference. A recent study from fiscal year 2016 showed that “64% of political spending disclosure resolutions at companies where mutual funds owned more than 5% of the stock would have garnered a majority had these companies voted their shares in support of the resolutions.”
BlackRock is the largest mutual fund company in the world holding north of $6.4 trillion in assets. In its company investment guidelines, BlackRock states it does not generally believe it is the “role of shareholders to suggest or approve corporate political activities.” Based on the size of BlackRock and its company investment guidelines, it naturally follows that BlackRock plays a large role in whether these shareholder resolutions succeed or fail.
On May 23, 2019, BlackRock had its own shareholder resolution from investors who want to know more about what their money is funding when it comes to risky political spending. The resolution called for an annual report disclosing the company’s trade association and lobbying expenditures. The proposed annual report would also elaborate on BlackRock’s procedures and guidelines for determining lobbying communications and payments. The exact language of the resolution can be found here.
Though the resolution lost, garnering 21.7 percent of shareholder votes, it was the highest level of support the proposal has received at the company, rising from 20.8 percent in 2018, and less than 20 percent in 2017. While a support level of almost 22 percent might seem low, these numbers can be deceptive. Notably, a significant amount of BlackRock’s voting shares are held by company insiders and large stockholders like the national bank, PNC. It’s often the case that these large stockholders vote with management on shareholder proposals and therefore make it appear as if outside shareholders don’t care about an issue like lobbying disclosure. In reality, 21.7 percent support is quite strong.
While the resolution may have technically failed to garner majority support, the investors and the public are still clamoring for lobbying information to be disclosed by BlackRock. Led by BlackRock’s Big Problem, a group devoted to exposing BlackRock’s role in the global climate crisis, many people protested outside of the shareholder meeting and several protestors were even barred from attending the shareholder meeting, despite having the appropriate paperwork.
BlackRock’s Big Problem has identified several ways in which BlackRock is contributing to the global climate crisis. For example, BlackRock is the number 1 owner of new coal investments worldwide. They also own a significant portion of shares in oil companies looking to drill in nature reserves in Canada and Alaska, like ExxonMobil and ConocoPhillips. Moreover, they own stock in companies working to promote the deforestation of the Amazon and parts of Indonesia. Given the climate crisis and the growing public pressure for our nation’s leaders to take bold action to reverse it, BlackRock potentially lobbying in favor of environmentally unfriendly policies could very well come back to harm the company and reduce the viability of investing in the fund. So, it’s very likely shareholders at BlackRock continue to bring proposals to tackle the lack of information at next year’s meeting as well.
In the meantime, although the shareholder resolution lost at BlackRock, there is still a need to make sure the mutual fund does the right thing in the future and votes in favor of similar shareholder resolutions proposed at companies they hold stock in. Groups such as the Corporate Reform Coalition are devoted to promoting shareholder resolutions that increase transparency on the part of companies and help to give investors the information they need to make sound choices with their hard-earned money.
Learn more at: