Wall Street’s top money manager, Larry Fink, enjoys sharing his economic wisdom with the Washington policy world. The BlackRock CEO reportedly has his eye on the Treasury secretary seat in a Hillary Clinton administration. He’s also been a passionate deficit hawk, with a particular zeal for raising the Social Security retirement age to 70. After all, he once said, most of us have jobs nowadays where we just “sit around.”
Fink may have been trying to prove this last point in 2015 by personally demonstrating how you can get a decent paycheck without doing much more than sit around. A really decent paycheck. Despite a 5 percent drop in BlackRock’s share price, Fink collected an 8 percent raise—to $26 million.
Fink’s pay for nonperformance makes BlackRock a ripe target for shareholder scrutiny. But the firm’s role in our country’s executive pay problem goes far beyond its own CEO’s paycheck.
As the top money manager in the world, with an astonishing $4.6 trillion in assets, BlackRock holds shares in thousands of US corporations. What does BlackRock do with all this clout? In shareholder votes on CEO pay, the firm almost always supports whatever corporate boards propose—despite a purported commitment to linking compensation to rigorous long-term performance standards. Between July 1, 2014, and June 30, 2015, it approved compensation plans over 96 percent of the time.
Investor Stephen Silberstein is working to end this rubber-stamp voting. BlackRock may not be the only mutual fund that turns a blind eye to executive excess. But its enormous size makes BlackRock and its CEO Larry Fink “the single outfit and person in the country most responsible for outrageous CEO pay packages,” Silberstein says.
The former software executive has filed a shareholder proposal that would, if passed, require BlackRock to come up with plans for “bringing its voting practices in line with its stated principle of linking executive compensation and performance.”
Predictably, BlackRock is urging shareholders to vote against the proposal. But company spokesperson Ed Sweeney told me in an interview that the firm’s leaders really do care about excessive executive compensation. They just deal with the problem in a more effective way—in face-to-face meetings with management.
Could BlackRock supply examples where these meetings have moderated executive compensation? These tête-à-têtes have always been private, Sweeney said. BlackRock would be unable to share any specifics.