Global investors such as BlackRock and Vanguard have significant ownership of Australia’s largest companies. Given the size of their funds, they have no choice but to hold stock in these companies. They, with the other large US investor, State Street, own in excess of 5% of the ASX 200. In some companies their combined ownership is larger.

While State Street’s guidelines have yet to be updated, BlackRock and Vanguard have published their 2025 proxy voting guidelines for US companies.

Notably, both funds have revised their language on board diversity and signalled a less prescriptive stance on environmental and social (E&S) issues in the upcoming proxy season.

This is consistent with a general backtracking on DEI in the US, as discussed in another of our articles HERE.

A summary of changes follows.

BlackRock

It is the board’s call

Much of the language has been tweaked to make clear that BlackRock expects the board (given its more in depth knowledge of the company) to make the right calls on setting given its individual circumstances. The focus is on disclosure and engagement. This is consistent with its practice, especially in Australia and New Zealand. Mind you, due to capacity constraints, it is only the very largest of the ASX 200 that can get a “look-in” for engagement on major changes in remuneration policy.

More neutral language on “board composition”

BlackRock’s 2025 voting policy has reframed the discussion on director diversity from the explicit language of “board diversity” to a more neutral tone of “board composition”. Direct referencing on gender, race, and ethnicity has been shifted to a footnote.

The explicit 30% diversity membership targets were replaced by a softer expectation for the board to have a “mix of professional and personal characteristics that is comparable to market norms”.

Similarly, expectations of boards comprising at least two women and a director who identifies as being part of an underrepresented group was replaced with a statement that BlackRock may on a case by case basis vote against companies considered “outliers” from S&P 500 market norms.

For ASX 200 companies we would not expect the focus to move away from gender as most data providers apart from one on which BlackRock and other major US investors rely only provide ASX 200 gender data.

In a footnote it is noted that the norms are for 30% or greater diverse representation among the board, where diverse representation means a mix of professional and personal characteristics (including gender, race/ethnicity, disability, veteran status, LGBTQ+ and national, indigenous, religious or cultural identity.)

Some question if voting guideline detail moves into the footnote, does it represent a change or merely the appearance of one? Informed US commentators suggest BlackRock has just tried to minimise its visibility for various US funds influenced by changing political sentiment.

Other updates on executive compensation and equity plans

An interesting development is occurring in methods of benchmarking pay. BlackRock now emphasizes the importance of rigorous performance measures in justifying pay increases, rather than relying solely on peer traditional pay level benchmarking alone. This is in its infancy among US companies and advisers in the US, given that US disclosures only relatively recently required comparative performance to be published in the proxy compensation analysis and discussion report. While Australian boards usually moderate pay adjustments in light of performance as well as traditional benchmarking, we could see sophistication levels ramp up here as well.

BlackRock also now encourages companies to submit equity grant proposals for shareholder approval more frequently than required by listing standards. It expects boards to clearly explain material factors contributing to any significant increases in share reserve requests. Further, BlackRock explicitly states it may vote against compensation committee members if there are concerns about the structure or design of equity compensation plans, imprudent equity grant practices, or excessive equity use. This is clearly focussed on US issuers, given that equity plan approvals last for 10 years. In Australia, it is optional under ASX listing rule 7, and it lasts for just 3 years, and dilution relative to the US is miniscule, so not really an issue here.

When assessing golden parachutes, it has added an additional consideration, being the “percentage of total premium or transaction value that will be transferred to the management team, rather than shareholders, as a result of the golden parachute payment.” This is again not an issue in Australia, and typically addressed in a scheme of arrangement requiring shareholder votes if an acquirer thinks it is a problem.

It has also added a section noting that it may vote against members of the compensation committee where a board implements or approves a repricing or option exchange without shareholder approval, or against the annual say on pay vote if it involves named executive officers. In Australia, repricing of options is prohibited under ASX listing rule 6.23.

Vanguard

Board composition

Vanguard’s stance is similar to Blackrock’s, promising negative votes if board composition or related disclosures are inconsistent with relevant “market-specific governance frameworks” or “market norms”. Some may wonder if some of the governance folks meet so often in NY bars that variation in voting guidelines among the big players can actually vary…

While Vanguard continues to support boardroom diversity and explicitly states that boards should reflect “diversity of skills, experience, perspective, and personal characteristics (such as age, gender, race, and ethnicity)”, it no longer encourages companies to disclose directors’ personal characteristics (such as race and ethnicity) and no longer requires “at minimum, diversity in gender, race, and ethnicity on the board”.

Shifting emphasis on environmental, social and sustainability proposals

Vanguard has reiterated its role as a passive investor, stating that it does not “dictate company strategy or interfere with day-to-day management.” The fund is more likely to support disclosure proposals rather than proposals advocating for specific environmental and social (E&S) policies or targets.

Vanguard tightened its limit on “over-boarding”

Vanguard’s 2025 guidance has tightened its definition of “over-boarding” by reducing the limit from more than two public company board seats for named executive officers (NEOs) to now applying for all public company executives. (Blackrock’s limit remains at a total of two public company boards for NEOs and Executive Chairs.) This is not a problem for ASX listed entities, almost all of whom think that the CEO’s 24/7 focus should be on their sole employer.

Other updates on executive compensation and equity plans

Vanguard has removed a section that noted cases that raised “higher level of concern”, which included:

• Plans that cannot be reasonably interpreted by investors
• Plans in which the maximum dollar payout per participant is not disclosed
• Broad discretion to set performance criteria, or too many performance criteria
• Lack of correlation between performance and compensation

Of those, the maximum payout and the performance criteria point are not alluded to elsewhere.

See HERE for the BlackRock 2025 proxy voting guideline and HERE for Vanguard voting guideline.

© Guerdon Associates 2025 Back to all articles