Large Institutional investors Respond to the Proxy Voting Debate
/This article draws from Dorothy S. Lund’s scholarly work, “The Past, Present, and Future of Proxy Voting Choice,” which surveys the evolution of U.S. proxy voting policies and details recent reforms by major index fund managers in response to political and public scrutiny.
The role of BlackRock, Vanguard, and State Street in U.S. markets has changed dramatically over the past two decades. Together, these managers hold massive stakes in most public companies and have become central players in corporate governance. This concentration, combined with the rise of index funds, prompted a lively policy debate: should a handful of big asset managers wield so much voting power?
Under pressure from policymakers and clients, especially on high-profile issues like ESG (environmental, social, and governance), these firms have responded by rolling out voting choice programs. BlackRock’s and State Street’s initiatives now allow a significant portion of institutional and some retail fund investors to guide votes based on selected policy templates. Vanguard has joined as well, expanding access to similar options.
While these programs do not yet put all voting power in the hands of individual investors, they provide new flexibility. Investors can opt into policies that match their priorities or values, such as sustainability or corporate governance best practices. The effectiveness and reach of these programs are still developing, but for the first time, a broad base of fund holders is participating, even if only indirectly, in corporate decision-making.
For example, board diversity is a common proxy voting topic where investors' preferences may vary. BlackRock’s 2025 proxy voting guidelines reflect a case-by-case approach to diversity voting decisions, removing rigid numerical targets but still emphasizing diversity’s importance relative to market norms.
Through BlackRock Voting Choice, institutional and eligible retail investors can now direct their pro-rata share of votes or select from third-party voting policies that might be stricter or more lenient on board diversity issues than BlackRock’s default policy. This means an investor who prioritizes board diversity could opt into a voting policy that votes against boards lacking sufficient gender or racial diversity, while another investor might choose a policy that applies a different threshold or focus.
This flexibility exemplifies the practical impact of voting choice programs: empowering investors to exercise their governance preferences on specific topics such as diversity, while still investing through large index funds. It also demonstrates how the Big Three are adapting governance oversight to evolving political and client demands.