BlackRock Inc., the world's biggest money manager, is looking toleverage its $3.3 trillion of client assets by embarking on anunprecedented campaign to urge corporations to adoptshareholder-friendly practices.

Laurence D. Fink, BlackRock's chief executive officer, said in aletter yesterday to 600 of its biggest holdings, including AppleInc., Coca-Cola Co., BNP Paribas SA and Deutsche Telekom AG, thathis firm “seeks to engage in dialogue” with management to addressissues that will be raised this year at shareholder meetings.

“We think it is particularly important to have such discussions– with us and other investors – well in advance of the votingdeadlines for your shareholder meeting and prior to any engagementyou may undertake with proxy-advisory firms,” Fink wrote in theletter, referring to companies that help institutional investorsdecide how to vote.

BlackRock, which is based in New York, holds at least 5 percentof the shares of 2,400 companies worldwide. The firm's publicstance under Fink, who co-founded BlackRock more than two decadesago, is unusual in the U.S., where traditional asset managershaven't typically been vocal about corporate practices at companieswhose shares they hold. Fink said last year he believes moneymanagers will play a larger role in financial markets as WallStreet's influence declines.

“Fink has achieved so much and acquired such a high profile thathe believes there is an obligation to lead institutional assetmanagers, and corporate governance is a hot topic to focus on,”Burton Greenwald, a mutual-fund consultant in Philadelphia, said ina telephone interview. “He may also see this as an opportunity toenhance the reputation of BlackRock and the overall image of WallStreet-type firms at a time when Wall Street is under witheringfire from all quarters.”

While some pension funds, union plans and activist investorssuch as Carl Icahn and Nelson Peltz have a reputation forexpressing their views on governance-related topics ranging fromclimate change to company strategy, managers of mutual fundstypically avoid such strategies.

A May 2011 study by the American Federation of State, County andMunicipal Employees, a public workers' union, and Fund Votes, anindependent research website, showed that mutual funds supported 80percent of management proposals in 2010, compared with 84 percentduring the prior year. In a presentation on its website, BlackRocksaid it has voted in favor of 91 percent of proposals recommendedby management.

20-Member Team

BlackRock became the world's biggest asset manager aftercompleting its acquisition in December 2009 of Barclays GlobalInvestors, which added index products such as exchange-traded fundsto the firm's active stock and bond holdings.

Since then, BlackRock has put together a 20-member team forcorporate governance and responsible investment with the primarygoal of protecting investment assets and increasing client returnsover time, Michelle Edkins, who heads the group, said in aninterview.

“Good quality leadership by boards and good quality execution bymanagement leads to better performance by companies over time,”said Edkins, a former executive at Hermes Fund Managers Ltd., aLondon-based investment firm. “As a major shareholder on behalf ofour clients, we want to make sure that we protect the value ofclient assets.”

In yesterday's letter, Fink wrote that BlackRock reaches itsvoting decisions independently of proxy-advisory firms and thatthey are designed to “protect the economic interests” of itsinvestors.

Big shareholders can cause companies to change certain practiceseven before a proposal comes up for a vote. Last year, GeneralElectric amended terms of the 2 million options awarded to CEOJeffrey Immelt by linking them to cash flow and stock performance,the company said at the time. The move came after conversationswith top shareholders, including BlackRock, before the shareholdermeeting.

BlackRock also undertakes what it describes as“event-driven” engagements with companies when something happensthat could harm shareholders in a specific industry group, Edkinssaid. The firm started discussions with energy companies after awell operated by BP Plc spewed oil into the Gulf of Mexico in April2010. BlackRock was London-based BP's largest shareholder as of theend of that year, according to data compiled by Bloomberg.

Edkins says BlackRock isn't interested in managing orinterfering in the day-to-day operations of companies it holds.BlackRock will seek conversations on broader topics, includingindependent boards at companies, executive pay and successionplanning, she said.

'800-Pound Gorilla'

“Lots of firms now outsource their proxy voting,” MercerBullard, president and founder of Fund Democracy, an Oxford,Mississippi-based mutual-fund shareholder advocacy group, said inan interview. “That they have people working full time on thissuggests BlackRock believes that there are investment returns to behad by being smart about using their shareholder power.”

Geoff Bobroff, an independent fund analyst, said thatBlackRock's large passive business puts it at a disadvantage tofirms that employ active stock-picking because index funds cannotsell the shares if they are dissatisfied with the management.Bobroff also said companies may not be receptive to BlackRock'sideas.

“They are the largest asset manager in the world and from thatstandpoint some companies might take affront,” said Bobroff, who isbased in East Greenwich, Rhode Island. “In one regard it's the800-pound gorilla flexing its muscles.”

Edkins said being a passive holder actually helps build arelationship with companies, because the firms know that the moneymanager will maintain its stake.

“Having a foundation of a passive holdings strengthen theconversation because the companies realize this is a long-termrelationship,” Edkins said. “It doesn't make us any moreinfluential.”

BlackRock's Fink, who co-founded the firm in a one-room officein Manhattan in 1988, said during an alumni event hosted by UCLAAnderson School of Management in November that as the power oftraditional Wall Street firms wanes, money managers have a greaterrole in shaping financial markets.

“I believe we're going to go into the decade where the moneyholders are going to have a significant responsibility, more thanwe've ever had in our lifetimes,” Fink said at the time. “So thinkof what that means for proxies and our responsibility in voting andthings like that.”

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