BlackRock founder Larry Fink used his annual letter to CEOs to rebut accusations of going “woke.”
Fink, who has led BlackRock for decades, defended “stakeholder capitalism” from the notion that it is a political movement and urged companies to embrace its tenets.
“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper,” Fink said. “This is the power of capitalism.”
Stakeholder capitalism bucks the notion that the sole purpose of a corporation is to serve its shareholders, with an emphasis on providing value to customers, employees, suppliers, and communities. Recent years have seen a shift on Wall Street toward embracing stakeholder capitalism as well as a focus on environmental, social, and governance standards.
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Fink has taken to writing an open investment letter each year that is considered a must-read for executives and business leaders.
“Our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders,” Fink wrote.
Fink’s 3,300-word letter was aimed at critics who say that companies that prioritize ESG initiatives don’t value bringing in returns for shareholders. He argued that decarbonizing and working to address climate change don’t subtract value from shareholders but rather insulate the long-term interests of shareholders.
“Few things will impact capital allocation decisions — and thereby the long-term value of your company — more than how effectively you navigate the global energy transition in the years ahead,” he said.
BlackRock is the world’s largest money manager, and Fink has had considerable sway in the business community because of the firm’s power. In 2020, he used his letter to focus on climate change, saying the matter was becoming a “defining factor” in BlackRock’s assessment of companies. After the letter, several corporations announced plans to slash their carbon footprints.
Fink and BlackRock have been criticized by both sides of the political spectrum. Some environmentalists have accused the money manager of not doing enough to further the cause of sustainability, while some on the Right have said BlackRock is using “woke” posturing to push businesses further into the political realm.
BlackRock has also been the target of criticism over how it conducts business in China, which is accused of committing genocide against ethnic Uyghurs. Last year, Fink’s company began tapping into the Chinese market by offering mutual funds and investment products to Chinese investors, becoming the first foreign-owned firm to be allowed to do so.
Additionally, the research arm of the company also encouraged investors to triple their exposure to Chinese assets. Fink’s foray into China was met with bipartisan condemnation, with billionaire and liberal political philanthropist George Soros calling the move a “tragic mistake.”
Soros, often seen as a bogeyman by the Right, argued in an op-ed that BlackRock’s money invested in China would help prop up the regime of General Secretary Xi Jinping and that Congress ought to “pass legislation empowering the Securities and Exchange Commission to limit the flow of funds to China.”
Consumers’ Research has invested heavily in opposing BlackRock over its Chinese dealings. Late last year, the group sent a letter to 10 governors whose states’ public pensions are invested in BlackRock. The letter highlighted each state’s exposure and included a “consumer warning” detailing the money manager’s ties to the country.
“BlackRock is taking your money and betting on China. BlackRock is knowingly using investments funded by hard-working Americans to support companies directly tied to the Chinese Communist Party,” the warning read. “These investments made with Americans’ retirement savings are strengthening the Chinese economy and enhancing the Chinese military.”
This week, West Virginia’s Treasurer Riley Moore announced that his state would end the use of a BlackRock investment fund. Moore said that BlackRock “has urged companies to embrace ‘net zero’ investment strategies that would harm the coal, oil and natural gas industries, while increasing investments in Chinese companies that subvert national interests and damage West Virginia’s manufacturing base and job market.”
Consumers’ Research had previously launched an ad campaign targeting BlackRock that featured mobile billboards driving around New York City and Washington, D.C., denouncing the company’s investments. State-specific digital ads have also been created.
The shift toward stakeholder capitalism was jump-started in 2019 when Business Roundtable released a statement, signed by 181 CEOs, that tried to redefine what the purpose of a corporation is.
Fink’s letter also discussed changing workplace dynamics brought on by the pandemic and described the shift as a “new world of work.”
No relationship has been changed more by the COVID-19 pandemic than that of employers and employees, said Fink, who noted that the number of people quitting is the highest since the country began keeping records about two decades ago.
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“As companies rebuild themselves coming out of the pandemic, CEOs face a profoundly different paradigm than we are used to. Companies expected workers to come to the office five days a week. Mental health was rarely discussed in the workplace. And wages for those on low and middle incomes barely grew,” he wrote.
“That world is gone,” Fink opined.
