NEW YORK, May 17, 2016 /PRNewswire/ -- In a little more than a week, BlackRock (NYSE: BLK) shareholders will be able to urge the world's largest asset-management company to shift away from its lax approach to overpaid CEOs. BlackRock not only is the biggest investor in the marketplace, but it also has an overpaid CEO (#51 on the 2016 list compiled by As You Sow) and the worst track record among major investors on approving high CEO pay (99 percent).
Resolution 5 sponsored by The Stephen M Silberstein Revocable Trust calls on BlackRock to issue by December 2016 a report that "evaluates options for bringing its voting practices in line with its stated principle of linking executive compensation and performance, including adopting changes to proxy voting guidelines, adopting best practices of other asset managers and independent rating agencies, and including a broader range of research sources and principles for interpreting compensation data." The full text of Resolution #5 and the supporting statement is available online at https://www.sec.gov/Archives/edgar/data/1086462/000121465916010903/l415162px14a6g.htm.
In light of its track record of turning a blind eye to excessive CEO compensation, BlackRock has become the focus of intense media scrutiny, including recent articles in Reuters, New York Times, Huffington Post, Bloomberg, Pensions & Investments, Fortune, and The Nation.
BlackRock also is the target of an ongoing SumOfUs petition campaign that so far has attracted nearly 74,000 signatures, including more than 1,500 BlackRock iShares clients, over 1,750 BlackRock investors, and more than 2,000 BlackRock customers.
A 2016 report from As You Sow identifies BlackRock's CEO, Larry Fink, as the 51st most overpaid CEO in the S&P 500. According to the resolution, Fink's pay was raised 8 percent last year (to $26 million a year), nearly three times the 2.7 percent profit posted by the company – and at a time that BlackRock shares fell 5 percent in value during the year.
The As You Sow report of the 100 most overpaid CEOs shows that BlackRock voted against only three CEO pay packages, although it held 99 of the companies in its portfolios. The report's review of CEO pay votes by 23 mutual funds found the median level of opposition was 22 percent. Schwab funds, for example, voted against 35 percent of the overpaid CEOs. (The 99 percent support level for BlackRock referred to in the shareholder resolution is in the context of all "say on pay" votes, not just the 100 companies highlighted in the As You Sow Report.)
Resolution sponsor Stephen M Silberstein said: "Investment companies have a fiduciary responsibility to act in the best interest of their customers and an obligation to vote accordingly. It is not in the best interests of investors, or the shareholders of BlackRock, to have ever escalating CEO pay, or even high CEO pay, at the companies in which they invest."
Rosanna Landis Weaver, lead author of the As You Sow report on CEO pay, said: "BlackRock arguably is the posterchild today for excessive CEO compensation. It embraces it in its own ranks and it shows no concern about high CEO pay elsewhere. It is not true that CEOs will only work effectively if they are paid outrageous sums of money, or that they need that money to 'incent' them to do their job, or that there is such a shortage of people capable of being effective CEOs such that 'the market' has to raise CEO pay to the sky, and continue to raise it every year."
From July 1, 2014 through June 30, 2015, BlackRock approved, with its "say on pay" proxy votes, 99 percent of CEO pay packages in the S&P 500 companies. This level of support was higher than that of other investment managers; the average approval rating of 118 of these managers was 90 percent.
By rejecting only 1 percent of CEO pay packages, BlackRock is exercising less fiduciary responsibility -- by a factor of 10 -- than the median investment manager, which rejects about 10 percent of CEO pay packages. BlackRock also fails to meet the standards suggested by the two advisory services (ISS and Glass Lewis) which recommend rejecting about 15 percent of CEO pay packages, and it falls below numerous pension funds which reject 20 percent or more of CEO pay packages.
Blackrock's actions on excessive CEO compensation are inconsistent with its stated proxy voting practices, which state: "We may determine to vote against the election of compensation committee members and/or Say on Pay proposals in certain instances, including but not limited to when: We identify a misalignment over time between target pay and/or realizable compensation and company performance as reflected in financial and operational performance and/or shareholder returns; or We determine that compensation is excessive relative to peers without appropriate rationale or explanation, including the appropriateness of the company's selected peers."
The supporting statement for Resolution 5 also notes: "Numerous studies have shown that there is no correlation between CEO pay and company performance … Indeed, it has been argued that 'performance' incentives can lead to bad behavior on the part of corporate executives … (T)he highest levels of CEO pay are not reflective of company performance. It may be said, then, that high CEO pay at SP 500 companies is not reflective of 'performance' at anything other than being lucky enough to be the person chosen for that job."
BlackRock manages 7,700 portfolios with $4.6 trillion in assets under management. It advises 94 of the Fortune 100 companies.
The Stephen M Silberstein Revocable Trust was established by Stephen Silberstein. In 1978, Silberstein founded the firm Innovative Interfaces, a leader in automated and online library systems.
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SOURCE Stephen M Silberstein Revocable Trust, San Francisco, CA