Blackrock and Vanguard Policy Changes for 2025

Blackrock Policy Updates

BlackRock made changes to their U.S. proxy voting guidelines benchmark policies for 2025. Below are summaries of the key changes:

Board and Directors:

BlackRock’s 2025 guidelines added language that noted the importance of the responsibility the board has in its oversight of long-term strategy of the company including corporate governance and other business risks.

BlackRock will seek to understand a company’s long-term strategy and the impact such strategy has for investors. If significant strategic targets are not achieved, or if the company materially revises its strategy, BlackRock expects the company to provide detailed explanations of these situations as well as the board’s role in reviewing and making changes. Additionally, BlackRock will look to the board to demonstrate the effectiveness of its oversight mechanisms in the management of business risks and fulfilling the company’s strategy.

BlackRock may consider voting against certain directors who hold particular responsibility when the company does not provide sufficient disclosures and does not properly demonstrate the fulfillment of corporate governance and risk oversight responsibilities.

Board Composition and Effectiveness:

The most notable updates to BlackRock’s 2025 proxy voting guidelines is that of its board composition expectations, particularly for S&P 500 companies. BlackRock will no longer expect a company to have at least 30% diversity and two women on the board. BlackRock will now analyse a company’s board size, business model, strategy, and location on a case-by-case basis. BlackRock may vote against members of the nominating/governance committee if an S&P 500 company significantly diverges from the market norm in terms of a mix of professional and personal characteristics.  This policy change will give BlackRock more flexibility in making its voting decisions.

Executive Compensation:

BlackRock’s executive compensation guidelines mostly remain consistent with those of 2024. However, BlackRock now prefers that “companies submit equity compensation plans for shareholder approval more frequently than required by listing exchange standards." BlackRock may vote against members of the compensation committee to address concerns about the equity compensation plans’ structure, design or grant practices.

Additionally, BlackRock may vote against members of the compensation committee if a board implements a repricing of options without shareholder approval; if such repricing includes an NEO (Named Executive Officer), BlackRock may additionally vote against the Say on Pay proposal.

Material Sustainability-related Risks and Opportunities:

BlackRock updated its guidelines to include a more neutral approach around their expectations for climate risk reporting. BlackRock will look to boards to oversee how management addresses material climate risks within their business model. In doing so, if BlackRock believes the board is not acting in shareholders’ long-term financial interests, they may express their concerns through votes against directors or voting in favor of shareholder proposals regarding sustainability.

Mergers, acquisitions, transactions, and other special situations

Assessing mergers, acquisitions, SPAC’s or other transactions, Blackrock will prioritize the long-term economic interest for their clients as shareholders. Boards must clearly explain the company's economic strategic rational for a proposed transaction. In its analysis, BlackRock  examines certain features of the transaction such as:

• Degree of premium to the company’s trading price.
• Strategic, operational, and financial rationale.
• Unanimous board approval and arm’s-length negotiations.
• Fairness opinion from a reputable financial advisor.

Vanguard Policy Updates

Vanguard recently published their 2025 U.S. Proxy Voting, which became effective on February 1, 2025. Here are Vanguard’s most notable shifts in their U.S. Proxy Voting Policy.

Board Composition:

In 2025, Vanguard will no longer look for boards to “at a minimum, represent diversity of personal characteristics, inclusive of at least diversity in gender, race, and ethnicity." Instead, Vanguard will “look for boards to be fit for purpose by reflecting sufficient breadth of skills, experience, perspective, and personal characteristics (such as age, gender, and/or race/ethnicity) resulting in cognitive diversity that enables effective, independent oversight on behalf of all shareholders.” Vanguard believes that the skills, experience, perspectives, and personal characteristics of a board should be in line with the company’s expertise, overall strategy, and material risks. If a company’s board composition along with its related disclosure does not align with market norms or market-specific governance frameworks, Vanguard may vote against the governance committee chair.

Mergers, Acquisitions, and Financial Transactions:

Vanguard’s U.S. policy provides additional insights into how it assesses mergers, acquisitions, and financial transactions.  Similar to the 2024 policy, the 2025 U.S. proxy voting policy is based on four pillars: valuation, rationale, board oversight of the deal process, and the surviving entity’s governance profile. This evaluation is governance-centric on a case-by-case basis and will look to assess the “likelihood that a transaction preserves or will create long-term returns for shareholders.” The difference from 2024 is that in 2025, Vanguard includes pillar-specific questions that are the foundation to their review of each pillar such as:

• Valuation: “Does the consideration provided in the transaction appear consistent with other similar transactions?”;
• Rationale: “Has the board sufficiently articulated how this transaction is aligned with the company’s long-term shareholder returns?”;
• Board Oversight: “Has the board provided sufficient evidence of the rigor of the evaluation process?”;
• and The Surviving Entity’s Governance Profile: “If the funds will be holders of any entities resulting from the transaction, do they retain rights that sufficiently protect shareholder interests?”.

Vanguard states, “the funds will consider independence, potential conflicts of interest, and management incentive,” in evaluation board oversight.

Environmental and Social Proposals:

Additionally, Vanguard removed details it had provided in its previous policy regarding its assessment of various E&S proposal types opting for a more high-level explanation of its policies and how they will be implemented.  Removing such details likely allows Vanguard more flexibility in their voting decisions. For 2025, Vanguard notes it may support a shareholder proposal which addresses insufficient company disclosures relative to market norms, addresses an approach that is specific to the company’s industry or driven by materiality, and “is not overly prescriptive, such as by dictating company strategy or day-to-day operations, time frame, cost, or other matters.”