The chief executive of the world’s largest asset manager has warned companies it is invested in it will use its weight to vote down excessive executive pay.
BlackRock’s Larry Fink said the asset manager would fight for “board accountability” for its investments in an annual letter to the chief executives of European companies. This includes exercising “our right to vote against incumbent directors or misaligned executive compensation,” he said.
The warning comes after a spate of shareholder revolts in the UK raised the scrutiny on executive pay last spring.
Fink renewed disapproval of the scale of share buybacks at a time when companies have historic cash piles and low rates of investment. In the US’s benchmark S&P 500 outstripped operating profits in the year to September 2016.
“While we certainly support returning excess capital to shareholders, we believe companies must balance those practices with investment in future growth,” he said.
With $5 trillion in assets under management, BlackRock has significant influence over companies in which it holds investments. However, it has also faced criticism in some quarters for failing to follow up the warnings with its voting record.
Fink also addressed the change in global operating conditions after a year of political turbulence in some of the world’s most important markets.
The election of Donald Trump as President in BlackRock’s home US market will have a significant impact on companies, said Fink. While refraining from expressing an explicit opinion on the President’s economic plans, he renewed calls for tax reform and infrastructure investment, two of the central planks of Trump’s campaign.
However, Fink defended globalisation, which Trump has explicitly denounced. Trump’s inaugural address as President and his later actions have raised the prospect of increased protectionism, undoing one of the most powerful economic trends since the Second World War.
Fink said: “I remain a firm believer that the overall benefits of globalisation have been significant, and that global companies play a leading role in driving growth and prosperity for all.
“However, there is little doubt that globalisation’s benefits have been shared unequally, disproportionately benefiting more highly skilled workers, especially those in urban areas,” he added.