There is a big difference in the way BlackRock and ACSI exercise their powers. BlackRock employs about 45 people globally and 14 in the Asia Pacific to manage its stewardship of investments.
It does what proxy advisers do and visits chairmen regularly. But it tends to try and sort out issues behind closed doors before exercising its vote at annual meetings. It has come under criticism for its failure to vote against resolutions regularly enough.
BlackRock is more heavily committed to governance than its index fund competitors such as Vanguard and State Street. Vanguard is believed to have one person globally looking after governance issues, while State Street has about six, with the Asia Pacific person based in Tokyo.
BlackRock’s voting power has, in the past few years, been diminished by the moves by some large clients to take voting decisions in-house.
ACSI takes its voting guidance from the country’s most aggressive proxy adviser, Ownership Matters. It has been at the forefront of making banks accountable for the conduct issues exposed by the Hayne royal commission. At recent bank annual meetings, Ownership Matters recommended voting against remuneration reports and in some cases voting against the award of shares to executives.
ACSI’s power will only grow stronger thanks to the likely exponential growth in the size of industry funds. The Hayne inquiry triggered a crisis of confidence in retail funds and this has had a material impact on industry fund inflows.
There is anecdotal evidence that cash inflows into some of the biggest industry funds have doubled this year. It is possible that as individual industry funds grow beyond $100 billion in funds under management they will take voting decisions in-house and not outsource it to ACSI.
But for the time being ACSI is the most influential organisation in the country when it comes to making boards of directors accountable for their actions.
ACSI says in its promotional material that its members “have a responsibility to act to enhance the long-term value of the savings entrusted to them.
“Through ACSI, our members collaborate to achieve genuine, measurable and permanent improvements in the ESG (environmental, social and governance) practices and performance of the companies they invest in.
“ACSI staff undertake a year-round program of research, engagement, advocacy and voting advice. These activities provide a solid basis for our members to exercise their ownership rights.”
TONY BOYD
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