Company Name: BlackRock (NYSE:BLK)
Industry: Investment Services
InvesGuard has just released a Corporate Governance scorecard for BlackRock. (BLK). BlackRock scores well in its Internal Control Environment. Its Compensation practices need to be strengthened. It also needs to increase the level of its Social and Environmental reporting.
( Click here to view BlackRock’s scorecard)
BlackRock has an interesting ownership structure. Although 21.1% of the company stock is owned by its employees and the public (Source: BlackRock), approximately 4.8% and 46.4% of BlackRock’s voting common stock are owned by Merrill Lynch & Co., Inc., a wholly-owned subsidiary of Bank of America Corporation, and The PNC Financial Services Group, Inc. respectively. Both these shareholders are big borrowers under the Government funded TARP program. PNC financial services has borrowed about $3 billion under the government run TARP program and Bank of America has borrowed $45 billion.
It is ironic that Bank of America and PNC whose fortunes have been squashed in the current credit crisis, benefit indirectly from the very same situation that put them in this position. How? Blackrock has won highly coveted large contracts from the Federal Government to provide asset manager services for assets that the Government took over as a result of this crisis. Bank of America and PNC hold 4.8% and 46.4% respectively of BlackRock’s voting common stock.
Given the obvious conflict of interest, Chair of the Federal Reserve, Ben Bernanke wrote to the chair of the Project on Government Oversight outlining controls to prevent any possible conflict of interest.
BlackRock’s Compensation practices as well as its Board Composition and Board Effectiveness seem to be weak .
BlackRock’s Audit Committee Charter appears to be strong in terms of the powers granted to its Audit Committee members. Off Balance structures on the company’s financial statement are supposed to be reviewed by such members. This is not an often seen requirement of Audit Committee members.
BlackRock publishes no information on its Social and Environmental impact.