Fund management giant BlackRock has faced down a proposal from almost 20% of its shareholders that it becomes more transparent about exactly it spends on political lobbying. The transparency proposal was tabled by AFL-CIO, one of the largest trade unions in the United States. The union says it is worried that big companies like BlackRock are exercising too much influence over government policy.
BlackRock is a very prominent fund manager, both in the United States and abroad. It increased its assets under management by more than 10% in 2016, to $5.1 trillion. Many of its shareholders now worry that it can exercise considerable political sway through the sheer scale of its lobbying activities. Not only that, but the company, via its funds, owns stakes in almost every major listed company globally.
AFL-CIO says it wants BlackRock to prepare an annual report that discloses its lobbying activities. This should also cover its membership of and payments to tax-exempt organisations that write and endorse legislation. It is not the first time the union tabled the proposal – last year it did the same, but garnered a bigger vote from shareholders of 26%, according to law firm Gibson Dunn.
BlackRock argues that the number of proposals being submitted by shareholders of listed companies arguing that firms provide more information on lobbying is declining, down from 126 in 2014 to 103 last year, again according to Gibson Dunn.
Why is this important?
Many people invest in BlackRock funds, either directly or via their pension funds and retirement accounts. BlackRock’s board said in a proxy statement that it felt the request was “unnecessary and not in the best interests of our shareholders.”
BlackRock spent around $2.5 million per year in 2014 and 2015 on political lobbying activities. At the EU level it spent between €1.25 million and €1.45 million, according to data that the fund manager submitted to the European Transparency Register.
BlackRock has also created waves by hiring former UK chancellor George Osborne as an adviser. This has created concerns that the offer of such roles can be used by fund managers and banks to influence political decision making, and represent a form of shadow lobbying at the highest levels of power. Many senior MPs will be thinking about what they do after a career in politics, and well-remunerated consulting roles in the City of London are considered a popular avenue.
BlackRock would like to point out that Osborne is “a part-time senior adviser to the BlackRock Investment Institute.” The Institute develops research and investment insights that help investors to understand the full range of geopolitical, technological and economic factors affecting their portfolios. Under the ACOBA guidelines that govern the role of politicians who leave office and take up roles within the private sector, Osborne is not allowed to carry out lobbying of the UK government for two years after leaving office.
Investors are frequently worried about whether funds invest in gambling, tobacco or arms stocks, or whether funds invest with companies that are polluting the environment, or supporting sweat shops in Asia and Latin America. What is less obvious is how companies, and fund managers, spend money in the process of influencing politicians. Nor is it readily apparent what the political agenda is of big asset managers, who make the investment decisions for billions of pounds of pension fund money, your pension fund money.
Trade unions and other groups are becoming more active in holding firms like BlackRock to account over their political lobbying spend. As a listed company, tasked with looking after literally trillions in other people’s money, does it not have a role to play in promoting more transparency to stakeholders like shareholders and investors in its funds?
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