BlackRock’s Fink Warns Potential Proxy Rules Would Empower Foreigners, Activists

As the White House considers an executive order that could limit how passive index fund managers participate in shareholder votes, BlackRock Chief Executive Larry Fink is warning of unintended consequences.

At the New York Times DealBook Summit in New York Wednesday, Fink said that keeping index fund managers out of shareholder votes would increase the influence of foreign investors and activists on American companies.

“I can tell you almost every CEO who approaches BlackRock is frightened of this outcome,” Fink said, referencing a scenario where index fund managers can’t participate in shareholder votes. “If index fund investors hold 30% to 40% of the shares and you take that out, it will create really skewed outcomes. Foreign investors will have more power, and so will activists.”

BlackRock—the largest investment manager in the world with trillions of dollars in passive index funds—voted with management more than 98% of the time last year, Fink added.

Some critics have said the growth of behemoth index-fund managers in the U.S. has given a handful of investment firms undue power over public corporations. Index-fund managers typically vote their shares on behalf of their clients according to their fiduciary duty, though they have also rolled out programs in recent years to let clients choose how to vote.