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Home / Business / Personal Finance

Companies open the doors when the world's biggest investor visits NZ

Tamsyn Parker
By Tamsyn Parker
Business Editor·NZ Herald·
8 Jun, 2017 09:15 AM4 mins to read

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Pru Bennett, head of investment stewardship for Asia Pacific at global investment manager Blackrock. Photo/Supplied.

Pru Bennett, head of investment stewardship for Asia Pacific at global investment manager Blackrock. Photo/Supplied.

When Pru Bennett wants to have a chat leaders of top public-listed companies open the door.

That's because the Hong Kong-based Australian has the might of the world's biggest asset manager - BlackRock - behind her.

BlackRock manages more than US$5 trillion worldwide, including investing money on behalf of New Zealand's Superannuation Fund, ASB bank and other institutions in New Zealand.

As head of investment stewardship for the Asia Pacific region Bennett's job involves talking to companies about corporate governance and responsible investment.

That ranges from executive pay to diversity, climate change and how a company manages its human capital.

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Visiting Auckland last week on one of her rare annual trips to New Zealand Bennett freely admits she has been talking to the directors of one of the companies BlackRock invests in.

But she doesn't name names. Her approach is under the radar.

When it make passive investments BlackRock's funds invest in the largest listed companies based on their index weighting.

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Because of this approach it can't just sell a company when it doesn't like what they are doing but that doesn't mean it sits back and does nothing.

"We can vote and engage," Bennett says.

If it isn't happy with how a board is paying the chief executive it can ask for an explanation and if that is not satisfactory or there is no change forthcoming BlackRock will vote against directors getting re-elected.

Bennett says New Zealand and Australian companies are easy to engage with compared to companies in Asia where large stakes are owned by families or the state.

"When we engage [with them] it is more of an introduction to BlackRock.

"We tell them we are like a family investor because we can't sell out and neither can they."

Challenges in Asia include ensuring independent directors are truly independent and have the right skills for the job.

Bennett says remuneration, diversity and climate change are the biggest issues it deals with across Australasia at the moment.

"I think a lot of issues have come to the forefront. Particularly in Australia where everyone has compulsory superannuation."

"Investors want to make sure companies are not externalising costs to the community or taking a short-term strategy to boost profits.

Bennett says it's about understanding what the company's footprint on society is and what the company is doing to manage that long term.

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"Climate change wasn't an issue five years ago. Neither was diversity."

Australian investors are banding together to fight for change.

Last year the Australian Council of Superannuation Investors said that from 2017 if a listed company had shown no progress or did not have a clear plan to achieve 30 per cent female directors on its board it will tell its members to vote against re-electing directors.

Australians already have greater say over executive remuneration.

In 2011 the country changed its corporate law so that if at two consecutive meetings over 25 per cent of shareholders vote against the directors' remuneration package, the directors have to stand for election again in 90 days.

New Zealand is behind on these fronts and will only introduce a conduct code in October which recommends listed companies specify their chief executives remuneration and that companies have a diversity policy - those who don't will need to explain why not.

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Bennett says New Zealand should take a wait and see approach on the changes but does point out that the say-on-pay change in Australia has been effective.

Having a policy on diversity is not going to solve gender or other diversity issues overnight either.

Bennett points to research she has undertaken on ASX200 companies which found just a dozen companies were actually following diversity policies or had one that actually spelled out what they were planning to do.

BlackRock doesn't go to annual general meetings as all of its decisions must be made ahead of time so it can proxy vote.

But Bennett says AGMs are key for smaller shareholders to have their say.

"Shareholders should make sure they vote and if they are not happy they should write to the chairman and attend the AGM and ask questions."

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Likewise members of KiwiSaver should communicate any concerns to their fund manager if they are not happy.

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