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What’s the Story?
ISS last week recommended shareholders should vote against the Blackrock compensation report at the 15 May 2025 AGM.
The 2024 AGM was also controversial, with the advisory vote carried with only 59% support. While the 2025 disclosures are enhanced, ISS claim that these “provide limited additional insights into pay determination,” so that shareholder support at the AGM is “not warranted”.
That point aside, ISS also have adverse comments on two specific compensation issues for the CEO Larry Fink.
First, the “lag in equity grant reporting” which ISS says should add an extra $6.6m to Mr Fink’s disclosed package of $30.1m, means the claimed $36.7m revised figure would include equity awards up by one third on the previous year.
Second, Blackrock has included Mr Fink in the new Carried Interest pay programme for the private markets funds launched in February 2025. ISS note that this adds to pay complexity with “no indication that this new incentive is intended to offset a portion of current pay opportunities.”
Why Does it Matter?
Top talent focused correctly within big companies makes a huge difference to delivered shareholder value. Shareholders should welcome that, not vote against. But for that to happen smoothly clear communication of pay quantum and the dynamics linking pay to performance should be easy to see.
Aspiration statements such as ”…a long standing pay for performance culture” fail this test.
When millions of variable pay are in point, the test is a high bar, particularly when incentive pay is a major part of pre-compensation profits. That is normally the case for large FS companies.
Full technical disclosures which fail to enlighten the commercial need fall short. Governance concerns among investors may extend beyond the top disclosures, into overall incentive pay spend.
Adding Mr Fink into the new Private Market Carry incentive is also a potential concern.
First, diluting carry left over for direct fund managers may be unwise. Second, board rewards should focus on the whole shareholder result, not just a subset result.
Further, carry can pay out very richly on success. The PPM of these new funds will have set out a target IRR figure, and so it is possible to give an indication of value on stated assumptions.
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When pay figures get large, it is hard to judge the pay value received by contrast to the extra shareholder performance with which it is linked.
Take a time based example of big number haziness, one million seconds represents less than 12 days, whereas one billion seconds is more than 31 years. A dramatic difference.
Wall Street top pay figures are huge, but the impact of top talent on value creation should not be ignored. Those sums are huge too.
That said, the link between pay outcomes must be explained with stark clarity, both on grant and when the vesting result is known. Anything short of that may well mean shareholders will question the integrity of the process or the outcome.
Paying Carry to a board member makes sense only where that individual contributes directly to the investment result. Even then care is needed, reward is better linked to the whole shareholder result. In fact, the Investment Association Principles of Remuneration 2025 say just that.
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