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BlackRock – Proxy Voting (2017)

BlackRock – Proxy Voting (2017)

Outcome: Successfully withdrawn following a productive dialogue around how the asset manager engages portfolio companies on workplace equality issues. During our dialogue BlackRock issued its Investment Stewardship Team’s first ever engagement priorities outlining ESG focus areas for 2017-2018. Among these priorities is human capital management, where BlackRock plans to probe companies on their approach to employee development, diversity, equal employment opportunity, health and safety, labor relations, and supply chain labor standards. Additionally, BlackRock has clarified the Investment Stewardship Team’s willingness to vote against management when “companies are insufficiently responsive to our efforts to protect the long-term economic interests of our clients.” BlackRock's linkage of its proxy voting to diversity and equal employment opportunity gives us confidence that the LGBT discrimination concerns we raised with BlackRock in the shareholder proposal will be getting priority attention and will impact voting analysis.

BlackRock’s Equal Employment Opportunity (EEO) policy explicitly prohibits discrimination based on sexual orientation and gender identity – to protect lesbian, gay, bisexual, and transgender (LGBT) employees that are not otherwise protected under federal and state laws. The company has earned a perfect score on the Human Rights Campaign corporate equality index, and internally offers an employee resource group to engage and support LGBT employees in promoting an inclusive environment.

BlackRock states: “Inclusion and diversity are key to our success. By fully leveraging our diverse experiences, backgrounds and insights, we can inspire innovation, challenge the status quo and create better outcomes for our people and our clients.”

This approach is consistent with research from Credit Suisse which finds that LGBT-supportive policies lead to positive business outcomes, lower staff turnover, and increased job satisfaction. Specifically, the April 2016 report documents that companies with strong LGBT policies and practices, saw share price outperformance of 3.0% per annum over the previous six years.

However, according to public fund voting records, over the past few years funds managed by BlackRock voted against all (eight out of eight) shareholder resolutions requesting companies, which BlackRock held, to add sexual orientation and gender identity to their corporate equal employment opportunity policies. These resolutions were voted on at American Financial Group, Exxon Mobil Corp, J.B. Hunt (which received a majority vote), and other companies. In contrast, funds managed by investment firms such as Wells Fargo, T. Rowe Price, and Charles Schwab have supported the majority of these shareholder resolutions.

These shareholder resolutions simply asked companies to include sexual orientation and gender identity in their EEO policies – language already included in BlackRock’s workplace policies.

BlackRock and its subsidiaries are responsible for voting proxies at companies in their portfolios. Aside from buy/sell decisions, proxy voting is one of the principal ways in which investors can engage corporate leadership on management of portfolio risks and opportunities related to governance.

We believe the inconsistency between how BlackRock votes proxies and its own internal policies and practices could pose a reputational risk to the company, especially given the contrast with competing investment firms. We believe it’s in BlackRock’s and its shareholders’ best interests to align its proxy voting with the company’s approach to LGBT inclusion and workplace policies.

Resolved: Shareholders request that Blackrock issue a report discussing the company’s proxy voting on workplace LGBT non-discrimination policy shareholder resolutions, at reasonable cost and omitting proprietary information. The report should assess any inconsistencies between BlackRock’s proxy voting record, policies, and guidelines on workplace LGBT non-discrimination shareholder resolutions and the company’s public position and internal policies on this issue. It should list all instances of votes cast that may reasonably appear to be inconsistent, and provide explanations of the incongruence. The report should cover the company and its subsidiaries, and the proxy voting records of the previous year. The report should discuss measures the company can adopt to help improve such consistency.

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