In December 2024, BlackRock released its updated U.S. proxy voting guidelines for benchmark policies. The changes will become effective as of January 2025. A summary of the key updates is provided below, organized by section headings as they appear in the 2025 proxy voting guidelines.
Board Composition
Perhaps the most notable changes to the proxy voting guidelines appear in this section, where the focus is now on “board composition” rather than “diversity” and achieving a variety of “experiences, perspectives, and skillsets.” Going forward, companies are urged to explain how their approach to board composition supports the company’s governance practices.
The updated guidelines (other than a footnote) no longer include references to gender, race/ethnicity, and age. Additionally, the recommendations that boards aspire to at least 30% diversity and include at least two women and one director from an underrepresented group have been removed.
However, the updated guidelines do indicate that to the extent an S&P 500 company board is an outlier and does not have a mix of professional and personal characteristics (including, but not limited to, gender, race/ethnicity, disability, veteran status, LGBTQ+, and national, Indigenous, religious, or cultural identity) that is comparable to market norms, BlackRock may vote on a case-by-case basis against members of the nominating/governance committee.
For companies with smaller market capitalization and those in certain sectors facing more challenges in nominating directors from different backgrounds, BlackRock will look for a relevant mix of professional and personal characteristics.
Board and Directors
While this section remains largely consistent with last year’s guidelines, there were a few noteworthy clarifications.
The updated guidelines continue to stress the need for company disclosure demonstrating that the board has fulfilled its corporate governance and risk oversight responsibilities. However, this section now also stresses BlackRock’s interest in understanding management’s long-term strategy and the milestones against which investors should assess its implementation.
The updated guidelines also indicate that if any strategic targets are significantly missed or materially restated, BlackRock will find it helpful when company disclosures provide a detailed explanation of the changes and an indication of the board’s role in reviewing the revised targets. BlackRock will also look to the board to articulate the effectiveness of these mechanisms in overseeing the management of business risks and opportunities and the fulfillment of the company’s strategy.
The updates also clarify that while a vote against a certain director may signal concerns with a director’s suitability for service on a particular board, it may also signal concerns with the particular role an otherwise qualified and effective director serves on a particular board.
Oversight Role of the Board
The list of factors that may signal to BlackRock that a board has failed to exercise appropriate oversight of management and the business activities of the company has been updated to include a company’s failure to provide timely disclosure of remediation of material weaknesses.
Board Term Limits and Director Tenure
The 2024 guidelines indicated that BlackRock will oppose “boards” that appear to have an insufficient mix of short-, medium-, and long-tenured directors. The updated guidelines indicate that BlackRock may oppose the election of “certain directors” that appear to have an insufficient mix.
Capital Structure Proposals – Equal Voting Rights
Management proposals to collapse multiple share class capital structures for a premium will be evaluated on a case-by-case basis under the new guidelines.
Executive Compensation
The updated guidelines continue to express concerns where increases in total compensation are solely based on peer benchmarking and now clarify that companies should at the same time consider rigorous measure(s) of outperformance. BlackRock also now encourages companies to clearly explain how compensation outcomes have rewarded performance.
Clawback Proposals
Boards will be expected to exercise limited discretion in foregoing, releasing or settling amounts subject to recovery for executive officers and no indemnification or insurance coverage for losses incurred by executive officers.
Equity Compensation Plans
While this section remains largely consistent with the 2024 guidelines, the following paragraph has been added urging companies to submit their equity compensation plans for shareholder approval more frequently and providing guidance on how BlackRock will evaluate share reserve requests:
“We find it helpful when companies submit their equity compensation plans for shareholder approval more frequently than required by listing exchange standards to facilitate the timely consideration of evolving plan governance practices. Particularly when share reserve requests grow significantly versus prior plans, boards should clearly explain any material factors that may potentially contribute to changes from the company’s past equity usage. We may support an equity plan share request if we determine that support for such plan is in the best interests of shareholders; however, we may also vote against members of the compensation committee to signal our concerns about the structure or design of the equity compensation plan or the company’s equity grant practices and the imprudent use of equity.”
Option Repricings/Exchanges
This section has been updated to consistently refer to both option repricings and exchanges.
BlackRock may vote against members of the compensation committee where a board implements or approves a repricing or option exchange without shareholder approval. BlackRock may also vote against a company’s annual advisory vote on executive compensation, where such a repricing or option exchange includes named executive officers.
Material Sustainability – Related Risks and Opportunities – Climate Change
The updated guidelines include a push for climate risk disclosure consistent with the International Sustainability Standards Board (ISSB) standards or the Task Force on Climate-Related Disclosures (TCFD) framework.
In addition, the updated guidelines emphasize that BlackRock is looking to boards to oversee management’s approach to addressing material climate risk in a company’s business model and may convey concerns about board oversight in their voting on director elections or supporting a business relevant shareholder proposal when, in its assessment, the board is not acting in shareholders’ long-term financial interests.
Corporate Political Activities
When analyzing shareholder proposals regarding a company’s political activities, BlackRock will, in addition to considering information provided by the company, review information disclosed by third-party research for industry peer comparison.
Companies that have BlackRock as an investor should familiarize themselves with the changes to BlackRock’s proxy voting policies for 2025 and consider whether any changes to their governance or compensation practices should be considered, including with respect to clawback recovery, the frequency of submission of equity compensation plans to a shareholder vote, and the submission of repricings and option exchanges to a shareholder vote. Companies that are not already providing sustainability-related information to their investors or that are providing the information under a framework other than ISSB standards or the TCFD framework, should consider whether they should begin reporting against ISSB or TCFD.
Companies should review their latest proxy disclosures to ensure there is sufficient information on director experience, perspectives and skillsets. Companies may still wish to retain demographic diversity information if for no other reason than to allow BlackRock (and other investors) to benchmark them against their peers. Companies should also address how their approach to board composition supports their governance practices, and ensure that their proxy disclosures on this matter are consistent with what is disclosed in their corporate governance guidelines and other applicable governance documents.
Companies should also consider the tenure of their directors and whether their board represents a sufficient mix of long-, medium- and short-tenured directors. Companies that may be perceived as having an “insufficient mix” of tenured directors should be prepared to explain the reasons for the perceived shortcoming and any steps being proposed to remedy it.