BlackRock and Vanguard have been accused of being “asleep at the wheel” for failing to tackle exorbitant executive pay in a sign of the growing public and political pressure fund managers are coming under to rein in excessive remuneration packages.
A study by non-profit As You Sow said the world’s largest fund managers have rubber-stamped pay packages for many of what it classes as the US’s most overpaid chief executives.
The study found that BlackRock voted against the pay packages of just 11 chief executives of the 100 who appeared on the overpaid list, while Vanguard voted against 12.
In contrast, Allianz voted against more than three-quarters, while asset managers such as Boston Trust and Dimensional voted against more than half.
The low votes against high pay by BlackRock and Vanguard come amid concerns that fund managers are failing to tackle fat cat pay because their own chief executives earn large sums of money.
Rosanna Landis Weaver, programme manager of the CEO pay initiative at As You Sow, said there is growing “awareness of the hazards of outlandish CEO pay packages”.
She added: “Unfortunately, awareness has not translated into votes. The rubber-stamping trend continues, even with evidence showing persistent underperformance of the highest paid CEOs.”
Andrew Behar, chief executive of As You Sow, added that it was time for the biggest fund managers to realise “how they’re abandoning their fiduciary duty by continuing to approve absurd pay packages”.
Dozens of big EU-based fund houses stepped up their opposition against US companies over executive pay last year, but US asset managers have been more reluctant to turn up the heat on corporate America.
However, both BlackRock and Vanguard, which have been accused in the past of failing to stand up to companies on controversial issues, have recently pledged to grow their stewardship teams in a bid to drive up corporate governance standards at the companies they invest in.
BlackRock said that as well as engaging and voting on pay, it looks “to hold compensation committee members accountable where we see a disconnect between pay and performance”.
Vanguard said it takes “very seriously our obligation to act as a voice” for fund investors.
“More so than voting, we believe engagement provides an opportunity to fully understand issues and target feedback and messaging to companies. Where we do detect material risks, such as misaligned compensation structures, we act with our voice and our vote,” it said.
To rank the chief executives, As You Sow looked at total shareholder return compared to pay. It also looked at proxy votes for pay at S&P 500 companies, using this to highlight businesses with a red flag.
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