BlackRock's Voting Choice Pilot: A Game-Changer…for Proxy Advisors

BlackRock's new Voting Choice pilot program for individual investors could significantly impact company engagement strategies, according to a recent New York Times article.

What’s happening: BlackRock is expanding its Voting Choice program to include over three million retail investors. Under the pilot program, individual investors can select one of six proxy advisor (both ISS and Glass Lewis) voting policies aligned with their values, ranging from socially responsible investing to a focus on corporate governance. 

• BlackRock indicates the pilot will run from February 14, 2024 to December 31, 2024.
  
  
• The NYT article noted that “State Street already has a similar program underway, and Vanguard is tiptoeing into this kind of voting choice, too.”

Why it matters: This introduces a new layer of complexity for companies trying to understand their shareholder base and may dramatically amplify proxy advisory influence over retail investors (a formerly inaccessible market). Companies may need to consider a revamped shareholder engagement strategy involving direct reach outs to individual investors online, potentially bypassing traditional channels focused solely on institutional investors.

The takeaway: While providing individual investors with a greater voice on proxy voting is laudable, the impact may be to increase the influence of proxy advisors and further their ability to impact voting outcomes on shareholder proposals that align with their world view of corporate responsibility on various social, political, and human resource issues.  

An additional impact may be on the ability of companies to effectively engage with shareholders on key issues, given that the traditional focus on institutional investors may be less effective.