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BlackRock flexes shareholder muscle to promote better governance
Top asset manager ramps up engagement and voting activities to advance board independence and diversity
The Asset 22 Jul 2021

Asserting its proxy voting rights to promote better corporate governance, BlackRock says it voted against 1,448 directors in 819 companies across Asia-Pacific in the past year for what it deems as their inadequate independence. It also did not support 22 directors in 18 companies in the region for the lack of gender diversity on their boards.

“We often have concerns with the balance of independence on boards in many Asian markets, especially where independent directors have served on the board for what we consider to be an excessive period,” the New York-based asset manager says in its investment stewardship report covering the period from July 1 2020 to June 30 2021.

Shareholder interests are best served when there is orderly renewal of the board, and a very long tenure may impair the independence of a director, it notes.

As such, BlackRock has introduced a new policy in the region “where we evaluate the tenure of independent directors combined with other factors including overall board renewal trends, directors’ skills profile, and the diversity and demographic make-up of the board”.

It says it also seeks a balance between the knowledge and experience of longer-serving members and the fresh perspectives of newer members.

At the same time, BlackRock stresses that diversity is an important factor in enabling quality leadership and financial performance. In Asia, several local corporate governance codes recommend greater female board participation.

In Malaysia, the corporate governance code recommends women make up 30% of the board, while in Singapore, the government has been encouraging increased female participation on boards. The Hong Kong Stock Exchange is proposing to introduce a mandatory disclosure requirement for companies to set and disclose numerical targets and timelines for achieving gender diversity.

“Given it is still a relatively nascent issue, we are mostly engaging companies to better evaluate and encourage board diversity and quality. We have introduced in our proxy voting guidelines gender diversity expectations for developed markets in the region,” the report says.

During the period, BlackRock voted against either the chair of the board or directors on the nomination committee of companies with all-male boards.

The report does not mention the specific impacts of its efforts to promote better corporate governance on the companies where it is invested, such as whether the directors it voted against were actually removed from the board. But it notes that its engagements with management teams have contributed to companies accelerating their efforts towards transparency and sustainability.

 “As a long-term minority shareholder on behalf of our clients, [BlackRock] undertakes all engagement and voting activities with the goal of advancing their economic interests. Our clients – the owners of the companies we invest in – are predominantly long-term investors. This means that we, as stewards, must be focused in building constructive relationships with the companies on our clients’ behalf to support their investment goals. To that end, we aim to be the voice of the long-term investor, urging companies to focus on the governance and sustainability risks that can impact their ability to generate long-term financial returns.”

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