Following up and answering to the recent position taken by Larry Fink, the Blackrock CEO, ECGS just wrote:
Dear Larry :
ECGS is, as you possibly know, the only multi-contributors European proxy research firm and as such we contribute actively to the market and governance debates in Europe . We would like to congratulate here for your strong Blackrock message to investors and issuers as concern possible excessive dividends payments and often uncontrolled buy- backs ! Our experience as proxy analysts at ECGS is that shareholders should make more frequent use of their voting right whenever these issues are tabled
We also fully support at ECGS your action against short-termism, your suggestion for stronger Board engagement and for declining taxes on long term equity income.
We suggest here three additional points supporting this valuable Blackrock’s engagement.
On the share buy-back issue, we believe that Blackrock should also persuade influent business school professors and financial journalists to stop confusing buy-backs with any “return to shareholders” . While supporting the reasoned use of buy-backs, we think that such confusing of a share repurchase with the payment of a dividend, or calling it a distribution is a solid non-sense, for the selling holder will have plainly sold his asset and will not have received any distribution income.
The second point we would like to suggest is that your preference for long term strategies and long-term shareholding should not impact the shareholders democracy, as unfortunately the issuers multiple voting rights and the investors share lending practices do. Instead, we strongly recommend you to request your team to push for companies to come back to the “one share one vote” principle and issue on a regular basis loyalty shares or warrants as designed by the association of a Columbia University professor and an Amundi researcher.*
We have also a concern on Blackrock responsible investor reputation as its engagement policy appears to still exclude any participation to resolution co-filing with other active long term investors. We were again sorry that your team recently, as always, declined joining resolution proposals prepared by long-term investors against the introduction of double voting rights in France. We hope that this will change in the future.
I look forward for seeing you soon at the ICGN conference in London or here any time in Paris and remain.
Yours sincerely
Pierre-Henri Leroy
Chairman Managing Partner
* Patrick Bolton and Frederic Samama / see also L Shares Journal of Applied corporate finance Summer 2013 Loyalty-Shares: Rewarding Long-term Investors
