BlackRock Updated 2024 U.S. Proxy Voting Guidelines

In January 2024, BlackRock released its updated U.S. proxy voting guidelines, outlining its 2024 stewardship approach and expectations. A summary of these policy updates is detailed in our report below.

Introduction

BlackRock updated its proxy guideline introductory section to include an emphasis on understanding the drivers of risk and financial value creation in companies’ business models via its three-tiered approach for long-term investment stewardship:

1. Engaging with companies to build their understanding of a company’s approach to corporate governance and business risks and opportunities.
2. Voting at shareholder meetings on management and shareholder proposals on behalf of clients who have delegated voting authority to BlackRock. Voting is the formal mechanism through which BlackRock signals its support for, or concerns about, how companies serve BlackRock’s clients’ long-term financial interests.
3. Contributing to emerging topical and stewardship issues that BlackRock believes may impact clients’ financial interests as long-term investors. BlackRock intends to share its perspectives on such issues with clients, policymakers, and others in the corporate governance ecosystem.

Shareholder Proposals

New for 2024, BlackRock provided further insight regarding its approach for assessing and voting on shareholder proposals:

• BlackRock states that it will not support proposals deemed overly intrusive to a company’s basic business decisions.
• BlackRock may support a proposal if management is on track to resolve the proponent’s concerns, but it believes that voting in favor will help accelerate efforts to address a material risk.
• BlackRock prefers companies to disclose the names of the proponent or organization that has submitted or advised on a proposal.
• If a proposal is focused on a material business risk that BlackRock agrees would need to be addressed and the intended outcome is consistent with long-term financial value creation, BlackRock will look to the board and management to demonstrate that the company has met the intent of the request made in the shareholder proposal.
• If BlackRock’s analysis and/or engagement indicate an opportunity for improvement in the company’s approach to an issue, BlackRock may support shareholder proposals that are reasonable and not unduly prescriptive or constraining on management.
• BlackRock acknowledges they do not submit or edit proposals or supporting statements – and must vote yes or no on a proposal as phrased by the proponent.
• BlackRock may not endorse every element of a proposal and may support a proposal for different reasons than those presented by a proponent. BlackRock indicates they will typically explain to a company its rationale for supporting such proposals.
• BlackRock states that they may vote against the election of one or more directors if the board has not responded sufficiently or with an appropriate sense of urgency to a shareholder proposal representing a material risk to a company.

Board-Related Updates, including Diversity

• Accountability of CEO and Management Succession Planning – If there is a significant concern regarding a board’s succession planning efforts, BlackRock indicated that it may vote against the responsible committee members or the most relevant director(s).
• Disclosure of Director Rotation – BlackRock shared its preference for clear disclosure of adopting corporate governance guidelines regarding committee leadership and/or membership rotation.
• Board Diversity Approach – BlackRock emphasized their new case-by-case approach for evaluating overall board composition and diversity. The company specifically cites multiple considerations, including Business Model, Strategy, Location, and Company Size, as factors that may impact its analysis of board diversity. BlackRock acknowledges such considerations may also play into the various elements of diversity that a board may attract.
• Board Diversity Disclosure – BlackRock indicated its preference for companies to disclose the process by which candidates for board positions are identified, but clarified their intent is not to prescribe any particular board composition. Areas of query include whether professional firms or other resources outside of incumbent directors’ networks are engaged to identify and/or assess candidates, the diversity of the board nominees for each director position, and the board composition considerations for diversity, including professional characteristics and demographic factors.

Material Sustainability-Related Risks and Opportunities, including Climate, Key Stakeholders, and Human Capital Management

Disclosure of Material Sustainability-Related Risks and Opportunities – BlackRock emphasized that robust sustainability disclosure is essential for investors to effectively evaluate a company’s strategy related to material sustainability-related risks and opportunities.

BlackRock explicitly identifies International Sustainability Standards Board (ISSB) standards, IFRS S1 and S2, as frameworks companies should consider useful guides to preparing such disclosure.

With the understanding that companies may have a multi-year phase reporting to align with ISSB standards, BlackRock specifically requests for companies to highlight industry- or company-specific metrics and disclose any:

• Material supranational standards adopted and industry initiatives in which they participate.
• Peer group benchmarking undertaken.
• Assurance processes implemented to help investors understand companies’ approach to sustainable and responsible business conduct.

Climate Risk Disclosure – BlackRock acknowledged low-carbon transition as an investment factor that can be a material risk for many companies and economies worldwide. BlackRock’s updated guidelines encourage companies to publicly disclose how they intend to deliver long-term financial performance through the transition to a low-carbon economy and, where available, publish a transition plan.

Key Stakeholder Disclosure – This year, BlackRock added language highlighting its view that it is the role of a company to determine its key stakeholders based on what is material to the business and its long-term financial performance. BlackRock expects companies to disclose how they have identified key stakeholders and considered their interests in business decision-making. Expectations for key stakeholder disclosure may include:

• A company’s workforce and the skills required for its future business strategy.
• Monitoring processes (referred to as due diligence) to identify and mitigate potential adverse impacts and grievance mechanisms to remediate any actual adverse material impacts.
• Articulation of how they address material adverse impacts that could arise from their business practices and affect critical relationships with their stakeholders.

BlackRock also expects disclosure regarding board oversight in the process of identifying key stakeholders.

Human Capital Management Disclosure – BlackRock clarified its existing policy for companies to disclose their approach to DEI and workforce demographics via responses to the U.S. Equal Employment Opportunity Commission’s Survey (EEO-1). BlackRock expects companies to provide further context based on the most relevant human capital management factors within a business, including workplace safety, compensation, benefits, talent development, and performance management.

A link to BlackRock’s policies is available here: https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-guidelines-us.pdf