Original text here from Patrice Bernard (LinkedIn)
Exchange-Traded Funds (ETFs) have become one of the favorite investment vehicles for savers today, thanks to their simplicity and low cost compared to direct market transactions. However, while they also consist of company shares, they obscure certain aspects, including the ability to make choices at shareholder meetings. BlackRock aims to address this shortcoming.
Typically, shares purchased through mutual funds of any kind are considered to be held by their manager, who therefore enjoys specific benefits, including voting rights. Recently, the industry giant has begun to change this rule for institutional investors, who now have the ability to directly exercise this right with some of the instruments available to them.
This initiative is still in its early stages, as a trial is currently being organized to offer a similar service to individual investors. Initially, only one fund will be involved – likely the Standard & Poor’s 500 index, which is among the most representative and popular, with nearly $400 billion under management, half of which is held by the general public. Following this development, half of the institution's $5.2 trillion in assets are now eligible for individual voting.
Subscribe to our newsletter:
Clearly, the logistics required to collect and report the preferences of over 3 million people at the polls can quickly become very complex. Moreover, unlike professional actors who, under certain conditions, obtain complete freedom of choice, the average Joe will only be offered a selection of six overarching policies as recommended by recognized advisory firms.
This large-scale testing phase primarily aims to assess investors' interest in being involved in the life of the companies in which they've invested their savings. Naturally, this aspect will also be correlated with their perception of the quality of the experience provided, which is crucial for user adoption. Format changes, particularly regarding participation methods, could therefore be made before any widespread implementation.
At a time when resolutions on social and environmental responsibility of organizations are becoming increasingly prominent at general meetings... but also regularly rejected for purely financial reasons, giving millions of small indirect shareholders a voice could represent an opportunity to change the status quo. At the very least, it will measure their priorities and commitments...
