BlackRock and Amazon get green light to block corporate purpose proposals

Round up: the latest on ESG-related resolutions

The US Securities and Exchange Commission (SEC) has upheld requests by BlackRock and Amazon to block a resolution calling for details on how the pair are fulfilling the lofty commitments of the Business Roundtable’s Statement (BRT) on the Purpose of a Corporation, which their CEOs signed in 2019. 

Since President Biden took office, the US regulator has publicly committed itself to ESG and addressing climate change, and many of its recent rulings appear to reflect that shift, but, arguably, not in this instance. 

The BRT’s landmark statement advocated a break from the traditional model of capitalism, which prioritises the shareholder, towards one in which all stakeholders are considered. 

Scepticism over the pledge prompted a flurry of proposals at signatory firms last year, asking how they planned to make good on the promises and put employees, customers, supply chains, communities and the environment on a more even standing with shareholders.

Resolutions were filed in 2020 at a number of US financial heavyweights, including JP Morgan Chase, CitiGroup, Bank of America, BlackRock and Goldman Sachs. All sought to exclude the proposals via the SEC’s ‘no action’ process, but only JP Morgan Chase was successful. The banking giant, whose CEO Jamie Dimon was chair of the BRT at the time of the statement, successfully argued that it had substantially implemented the commitments. Support for the remaining proposals was relatively low among shareholders – 9% at Bank of America was among the highest.

This year, both BlackRock and Amazon successfully used the ‘substantial implementation’ rule to evade BRT proposals. In its letter to the regulator, BlackRock stated that there “is virtually no difference between the principles espoused in the BRT Statement and those to which BlackRock already adheres”. The SEC appears to have agreed.

But Andrew Behar, CEO at As You Sow, the US non-profit behind the proposal, told RI that the regulator has “conflated intent with action” in its ruling on the world’s largest asset manager.

“In our opinion, BlackRock has expressed its intent to implement stakeholder capitalism and has made some adjustments but has yet to present a coherent plan to shareholders or substantially implement one,” he said. 

Amazon similarly argued in its ‘no action’ letter that its “existing governance and management systems already are consistent with and operate in accordance with the principles set forth in the BRT Statement”.

 The online giant was recently ranked in the bottom quartile of 800 companies based on its response to Covid-19 and on tackling inequality. That study was conducted by The Test of Corporate Purpose, an initiative co-led by big hitters Hiro Mizuno, ex- CIO at Japan’s government pension fund, Sacha Sadan, Director of Investment Stewardship at Legal & General Investment Management, and Oxford academic Robert Eccles. 

Racial audit concessions won at BlackRock and Morgan Stanley

Both BlackRock and Morgan Stanley have now agreed to undertake diversity reviews, after shareholders filed proposals calling for independently verified racial equity audits. The resolutions, which have now been withdrawn, were among eight filed at US financial giants this proxy season by CtW Investment Group and US labour union SEIU.

The concession by BlackRock, which was reported this week, comes just months after two former analysts wrote an open letter to its CEO and Chair Larry Fink claiming that they experienced sexual, religious and racial harassment while employed at the asset management giant’s New York office.

SEIU International Executive Board member, Alfonso Mayfield, described the move by BlackRock as a “bold decision” and “a gigantic step in the right direction.”

A spokesperson for CtW told RI that as part of the agreement with Morgan Stanley, the bank has “committed to an internal review related to the diversity of its employees and senior leadership ranks”. Morgan Stanley has also agreed to meet with shareholders to discuss the issue before its 2022 annual general meeting. 

The SEC this week rebuffed Amazon’s attempts to evade a similar proposal. The company failed to convince the regulator that the proposal from the New York State Common Retirement Fund constituted micromanagement. The SEC has already rejected similar attempts by JP Morgan Chase and CitiGroup to exclude racial equity audit proposals this proxy season.

“Companies like Amazon need to show they are doing more than just talking the talk when it comes to taking a stand against systemic racism”, said New York State Comptroller, Thomas DiNapoli in response to the SEC ruling. 

PayPal’s attempt to exclude racism proposal also denied by SEC

US SRI firm NorthStar Asset Management has had another success this year, this time at PayPal. The SEC refused to allow the online payment platform to exclude NorthStar’s proposal asking for a report on whether its “written policies or unwritten norms” reinforce racism. PayPal sought to remove the resolution on the basis that it had already implemented its key asks, but the regulator did not agree. 

Ivy Jack, NorthStar’s Head of Equity Research, told RI:“We’re very glad that the SEC has agreed with us that our proposal is fit for shareholders to consider”.

“Through our engagements this year on this proposal and similar topics, we learned that most company senior leaders don’t understand, and possibly don’t want to understand, how systemic racism works in their organisations –  and that if we want to fight systemic racism, company culture has to change”, she added. 

Last month, US retailer Home Depot’s attempts to exclude NorthStar’s proposal on tightening policies around prison labour in its supply chain was also thwarted by the SEC.