As You Sow, an advocacy group that promotes environmental and social corporate responsibility, has accused several major asset managers of bias in their proxy votes.

The group released a report that charges BlackRock, State Street, Vanguard and T. Rowe Price of using their proxy votes to favor the company managers in stockholder disputes. That’s a problem because the fund managers also receive compensation for financial services from these companies.

The report, “Uncovering Conflict of Interests: Proxy Voting Data Reveals Bias for Asset Managers to Favor Clients,” was released Monday.

A spokesperson for T. Rowe Price called the criticism ludicrous.

As You Sow said it had researched millions of proxy votes from January 2015 to June 2020 and also looked at Department of Labor disclosures. The group looked at the compensation asset management firms received for advising and administering corporate retirement plans. The group determined that major fund managers voted with the management of the companies they were also doing asset management business with at a significantly higher rate than they voted for management at companies that weren't clients. Large fund managers can hold investments in companies, as long as they are not doing other consulting or advisory work that gets them compensation from the companies.

In the analysis, BlackRock, State Street and T. Rowe Price favored clients for all six of the years analyzed. Vanguard favored clients in five of the six years, As You Sow said.

“Bottom line, proxy voting by major asset managers favors their clients—a clear conflict of interest,” said Andrew Behar, CEO of As You Sow, in a statement. “These powerful asset managers, which own large stakes in companies, have traditionally voted with management. These votes have frequently been the difference between winning a majority vote on critical, material issues like climate change. Strong fire walls must be established” to prevent the conflicts.

A spokesman for T. Rowe said in an email, “We take our responsibility to vote our clients’ shares very seriously and incorporate high-level principles of corporate governance and company-specific circumstances into each vote. Our overarching objective is to cast votes that foster long-term, sustainable success for the company and its investors.”

The email continued, “To avoid potential conflicts, the team responsible for developing our proxy voting guidelines is independent from our sales, client service and marketing units. Fund managers are free to vote in their shareholders’ best interests, but any votes contrary to our proxy voting guidelines are subjected to additional scrutiny before the proxy vote. To suggest that we would allow our own self-interest to imperil our reputation and our clients’ confidence is ludicrous and contradicted by our long history of responsible corporate stewardship.”

The other firms did not reply to emails requesting comment.

As You Sow said, “Existing literature has identified that fund managers voting proxies on behalf of shareholders, while also earning millions of dollars in record-keeping and advisory services, are exposed to conflicting priorities—yet little evidence has assessed if proxy voting biases are statistically significant, until now.”

As a remedy, As You Sow proposed, “fund managers can disclose existing business relationships when casting votes, [or] delegate votes to a neutral third party, as well as recuse proxy votes when a conflict is present. There also exist new technological solutions, [which enable fund managers] to vote all their proxies in one place, irrespective of how many asset managers or intermediaries they invest in.”