In anticipation of the shareholders’ vote on whether JPMorgan Chase Chairman and CEO Jamie Dimon would keep both of his titles and positions—he did—The New York Times ran an article shedding light on the role BlackRock Investments, the country’s largest asset manager, has had in restructuring the way funds look at and interact with companies’ boards. The writer, Susanne Craig, focused on Michelle Edkins, managing director at BlackRock and head of its Corporate Governance and Responsible Investment team. Edkins is also a First Mover Fellow under the auspices of the Institute’s Business and Society Program.
Like all First Mover Fellows, as part of Edkins’ fellowship, she has chosen a way to make an impact on society from within the company she works. Edkins has taken on the task of distilling Environmental, Social and Governance (ESG) data into a single risk signal to help portfolio managers distinguish between companies with high and low ESG risks. This information is being used by 5,000 of the largest global public companies.
In the article below, Edkins is continually held up as an individual who has greatly expanded dialogue with the companies in which BlackRock invests. Her engagement has not only benefitted BlackRocks clients, but has also created a model for and standard in corporate governance that other investment firms and publically held companies have followed.
From The New York Times
The Giant of Shareholders, Quietly Stirring
By SUSANNE CRAIG
Published: May 18, 2013
AT 11 a.m. on a Wednesday earlier this month, Michelle Edkins and her team began wheeling extra chairs into a cramped conference room in a San Francisco office tower, preparing for the corporate-governance equivalent of speed dating.
Once settled, Yumi Narita started describing the disappointing qualities of a big entertainment company she’d been checking out. “I’m inclined not to trust this compensation committee,” she told the group. “Year-over-year, they pay their C.E.O. more, and the metrics are often questionable.”
There were sympathetic nods around the room. Ms. Narita is one of about 20 analysts on the corporate governance team atBlackRock, the world’s largest asset manager. BlackRock’s size is mind-boggling. With almost $4 trillion under management, it is, according to a recent University of Michigan study, the single largest shareholder in one of every five United States companies. It manages money from pension funds and endowments as well as retail investors, controls large stakes in companies like JPMorgan Chase, Wal-Mart and Chevron and owns 5 percent or more of roughly 40 percent of all publicly traded companies in the country.
These investments give BlackRock tremendous influence, particularly now, during proxy season. At this time of year, public companies hold annual meetings, and shareholders vote on executive pay and elect corporate directors. Inside BlackRock, the small group of analysts led by Ms. Edkins meets every morning for about an hour, hashing out how BlackRock will vote its clients’ shares in hundreds of contests, zeroing in on directors they feel have been around too long, or ones who they think are overpaying executives.
These analysts have a language of their own, casually throwing around terms like “overboarding,” for when directors serve on multiple boards, possibly spreading themselves too thin; “engagement,” when a problem reaches a critical stage and merits a visit from a BlackRock analyst; and “refreshment,” when engagement doesn’t work and a director needs a heave-ho.
BlackRock is no activist investor. In fact, it’s far from it. It has never sponsored a shareholder proposal, and it rarely broadcasts its actions. Ms. Edkins says the firm generally votes against a director or a company proposal only when a behind-the-scenes “engagement” has failed.
A number of public pension funds and activist shareholders argue that BlackRock could use its influence to greater effect and say it sides with management far too often. It received a failing grade from the A.F.L.-C.I.O. in a 2012 survey; BlackRock voted with the federation just twice in 32 shareholder votes on issues that the union sees as important to the trustees of union pension funds.
“We believe shareholders have the power and the obligation to use every tool at their disposal to encourage greater accountability,” said Brandon Rees, acting director of the A.F.L.-C.I.O. Office of Investment. “It’s disappointing that such a large company like BlackRock votes for so few shareholder resolutions.”
There is agreement, however, that the firm has become more active in recent years, as other shareholders, too, have been expressing themselves more forcefully. It’s easy to be cynical about the value of voting on what are ultimately nonbinding resolutions that companies can ignore. But investors can now wield more power than in the past, partly because of recent laws that require companies to hold a vote on issues like executive pay. On Tuesday, in fact, shareholders of JPMorgan Chase will meet in Tampa, Fla., where the company is expected to announce the results of a vote on an unusually tense confrontation over a motion to split the roles of chairman and C.E.O., both now held by Jamie Dimon.