The world’s third largest asset manager has written to more than 1,000 listed companies to tell them that corporate culture is top of its stewardship teams’ engagement agenda this year.
Corporate culture, although difficult to measure and manage, affected a company’s ability to execute its long-term strategy, said Cyrus Taraporevala, president and CEO of €2.3trn State Street Global Advisors (SSGA).
This would be increasingly important “at a time of unprecedented business disruptions,” he said.
Companies and investors needed to address the issue of whether corporate culture was a good fit for a company’s strategy.
“By engaging on this topic in a more rigorous and structured way and by elevating these issues to boards, we believe we can help improve the overall governance quality of listed companies over the long term,” wrote Taraporevala. “As such, you should expect to discuss this issue with our asset stewardship team during their engagements over the next year.”
SSGA is a major passive investor. In his letter, Taraporevala noted that the manager engaged with companies because, in its index-based strategies, it did not have the option to sell a company’s shares when it disagreed with management over issues affecting long-term value.
Campaign group calls out BlackRock
The letter from SSGA came shortly after a group of NGOs and investors wrote to Larry Fink, the CEO of BlackRock, urging his company to support more shareholder resolutions on climate change-related matters.
Although BlackRock voted for some shareholder resolutions focused on climate disclosure and 2°C scenario stress tests, the letter stated, the asset manager “consistently votes against shareholder climate proposals and has a worse track record than other large global asset managers in this regard”.
For reasons including “the ongoing failure of most climate risk vulnerable companies to develop and implement business strategies compliant with the Paris goals”, BlackRock should be more prepared to use its voting rights to vote against management, the letter said.
The signatories said BlackRock should vote in favour of shareholder proposals asking companies to move towards aligning their capital expenditure and business strategy with the Paris climate agreement’s goals.
Two such resolutions are due to come up at the annual general meetings of banking group Wells Fargo and US transportation company JB Hunt this year.
Swiss pension fund-backed Ethos, Trillium Asset Management, and Boston Common Asset Management signed the letter, along with nine NGOs including ShareAction and ClientEarth.
The letter was sent in anticipation of Fink’s yearly letter to companies. Last year the CEO used the letter to urge companies to think about their wider impact and purpose.