The head of the world’s largest asset manager has warned that the relationship between shareholders and companies could become distorted if investors depend too much on having proxy advisers vote for them.

Larry Fink, chief executive officer of BlackRock, made the comment as part of his firm’s launch of a range of measures extending the passive-investment giant’s relatively new “voting choice” service allowing institutional clients to do their own voting.

In a letter addressed to his firm’s clients as well as the CEOs of companies, Fink said: “We believe that voting choice can empower more asset owners to have a deeper and more direct connection to the companies they are invested in and allow company management to better understand the views of these asset owners on critical governance issues.”

But informed proxy voting decisions require time, people, and expertise, he said, adding that BlackRock’s clients took their responsibility as stewards of capital ”very seriously”.

“While proxy advisers have a role to play in this process, overreliance on outsourcing to proxy advisers risks distorting the relationship between asset owners and the companies they invest in,” he said.

With other large asset managers looking at ways to give clients more say in shareholder voting, Fink said “this new ecosystem” would pose challenges for CEOs and their companies, as well as investors, and that firms might need to develop new models of engaging with asset owners on their most important voting matters.

“This revolution in shareholder democracy will take years to be fully realised, but it is one that, if executed correctly, can strengthen the very foundations of capitalism,” the BlackRock CEO said in the letter, published yesterday.

The voting choice programme, launched a year ago, lets institutional investors holding $1.8trn in assets decide how to vote their shares, although so far the owners of only $452bn have done so, according to BlackRock figures.

One part of the extension to the programme announced yesterday is a UK pilot project, which will give smaller investors in mutual funds the ability to use their voting power.

To make that work, BlackRock said digital investor communications platform Proxymity would help create pass-through technology to enable investors to exercise choice in how their portion of eligible shareholder votes are cast for the upcoming 2023 proxy-voting season – with details due in the next few months.

In another element of the changes, BlackRock is allowing insitutional investors to pick one of seven proxy voting policies from Glass Lewis – the second-biggest proxy adviser in the US, in addition to the seven policies already available from ISS, the largest proxy firm.

The moves come as BlackRock faces criticism about how it votes clients’ money on ESG matters.

In the US, Republican treasurers in conservative US states have withdrawn more than $1bn from the group, alleging it is hostile to fossil fuels, while some Democrats say BlackRock should push companies harder to cut carbon emissions, according to the Financial Times.

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