Featured Report
Equity in the Boardroom: How Asset Manager Voting Shaped Corporate Action on Racial Justice in 2020
While some major asset managers made statements in support of racial justice and equity following the protests against police brutality and anti-Black racism, this report demonstrates that “business as usual” proxy voting practices have shielded boards from accountability and reinforced a status quo that perpetuates the harms of systemic racism. This report, produced collaboratively by Majority Action and the Service Employees International Union (SEIU), documents the extent to which the world’s largest asset managers voted their proxies to hold companies accountable for their role in addressing systemic racism in 2020; specifically, at companies that have failed to include racially and ethnically diverse leadership in the boardroom and in response to shareholder calls for oversight and transparency in addressing harms to internal and external stakeholders.
KEY FINDINGS:
Of the 178 S&P 500 companies that had no Black directors as of their 2020 annual meetings, BlackRock voted to support the entire board at 163 companies and Vanguard voted to support the entire board at 166 companies. Of the 15 boards at which BlackRock voted against at least one director, the asset manager voted against only five Chairs of Nominating and/or Governance Committees. Of the 12 boards at which Vanguard voted against at least one director, it voted against only three Chairs of Nominating and/or Governance Committees.
As of mid-November, 56 S&P 500 companies had no directors with racially or ethnically diverse backgrounds. BlackRock had voted to support the entire board at 52 of these companies at their 2020 annual meetings, while Vanguard voted to support the entire board at 51.
Large asset manager proxy policies do not explicitly contemplate how to vote where a director’s past or current behavior as a corporate or organizational leader includes acts of racist harm; in practice, this means track records of overt racist harm are not disqualifying characteristics for voting on director elections. As a result, large asset managers have voted for directors with such track records, such as those at gunmaker Sturm, Ruger and electric utility Duke Energy, even when they had knowledge of these issues before voting.
BlackRock and Vanguard voted to shield management from shareholder efforts to improve corporate disclosures of lobbying activities and political contributions. Corporate policy influence has substantial direct and indirect impacts on communities of color, including on issues relating to economic inequality, civil rights, and environmental justice. In 2020, 48 resolutions to improve corporate policy influence disclosures received more than 20% shareholder support across the S&P 500. BlackRock and Vanguard voted against every single one. At least 19 of these resolutions would have received majority support had BlackRock and/or Vanguard voted in favor.
BlackRock and Vanguard voted overwhelmingly against proposals that were directly related to issues of racial justice in a company’s operations and/or governance, including board diversity, workforce issues, pay disparities, and civil rights issues in the United States. Of the 25 such proposals that received substantial shareholder support across the S&P 500, BlackRock supported only four, Vanguard only five.
By contrast, Legal & General and PIMCO voted for 100% of all of the policy influence disclosure and the racial justice resolutions reviewed in this report. Amundi voted for more than 90% of the policy influence disclosure resolutions.
RECOMMENDATIONS:
The report concludes that large asset managers must use their power and responsibility to promote racial justice by:
1) Holding boards accountable to the corporate governance best practice of diversifying boards to ensure that the perspectives of Black and brown communities are represented at the highest level of corporate decision-making.
2) Holding companies accountable to improving disclosure of corporate policy influence that directly and indirectly impacts Black and brown communities.
3) Supporting resolutions that seek to improve oversight of risks driven by systemic racism.