Giant index funds have enormous clout in shareholder votes and company directors underestimate them at their peril, BlackRock chief Larry Fink has warned.The billionaire investment chief said index funds have long been underappreciated by corporate bosses but are making their power known by increasingly threatening to vote against underperforming directors. “The implicit sanction of a vote against management if a company is not responsive to shareholder concerns about corporate governance matters” has led to a series of serious changes in major companies, Mr Fink said, writing in a report on asset management for the Banque de France.
He cited Exxon as an example, where pressure from BlackRock and votes against directors forced the company to scrap its “policy of not allowing direct dialogue between directors and investors.”
It also pushed Exxon and Occidental Petroleum to disclose information on the impact of climate change policies.
“The decision to vote against management followed several years of engagement with senior management at both companies on a range of governance, including social and environmental, factors relevant to the long‑term strategy and performance of the business,” he said in the report, written alongside BlackRock vice-chairman Barbara Novick.