You can’t talk the talk without having to walk the walk. BlackRock, the world’s largest asset manager, is being held to account for signing up to a major reset of corporate values.
At the end of last week campaign group As You Sow lodged a shareholder resolution demanding BlackRock report on the way the fund manager plans to live up to the intentions behind its decision to sign up to a statement that shifts its priorities from “shareholders” to “stakeholders”.
It was probably inevitable that signatories to the Business Roundtable statement in August faced pressure to explain what their pledge would mean in policy terms.
The Roundtable—a body including such business luminaries as Jamie Dimon, CEO and chair of JP Morgan Chase, Jeff Bezos, founder of Amazon, and Julie Sweet, chief executive of Accenture—announced in a statement it would reject the orthodox view that companies exist to “maximise stakeholder value” and would instead commit to “deliver value” to all stakeholders “for the future success of our companies, our communities and our country”.
At the time the statement was welcomed around the world by many who have argued for business, especially big multinationals, to focus on more purpose-driven agendas. However, there were those who questioned whether a stakeholder model could succeed given the trade-offs encountered by business as they attempt to please clients, shareholders and other stakeholders.
New coal capacity vs renewables
The involvement of Larry Fink, BlackRock’s chief executive, is now being tested. In some ways BlackRock’s investment policies were bound to attract this kind of attention. As You Sow argues that BlackRock is a huge investor in new coal power capacity around the world when many are focused on renewables and some asset management firms advocate divestment from fossil fuels.
The New York Times recently wrote that BlackRock’s voting record on social and environmental resolutions is largely at odds with other shareholders. As You Sow said: “These actions are not aligned with the new ‘purpose of the corporation,’ but instead undermine the core principles of the statement.”
Other observers believe BlackRock should expect to be under the microscope. Edouard Dubois, a partner with Squarewell, a consultancy advising boards on shareholder behaviour, says investors face pressure o deliver on good stewardship.
“As the largest asset management company in the world and a prominent listed company, BlackRock is in a very challenging position and will face scrutiny from all its stakeholders,” says Dubois. “In light of the increased transparency (through vote disclosures), investors are subject to pressure to showcase that they are good stewards of the assets they manage.”
According to Andrew Behar, chief executive of As You Sow, the current debate is about “reshaping the definition of capitalism”.
“The antiquated notion that corporations exist for the sole benefit of shareholder returns was long overdue for a rewrite given its basic conflict with long-term value creation,” he said.
As You Sow’s resolution asks the BlackRock board to prepare a statement providing its “perspective regarding how our company’s governance and management systems should be altered to fully implement the Statement of Purpose”.
BlackRock frequently attracts criticism for its policies given the values its chief executive promotes in public statements.
In his letter to chief executives of investee companies published in January this year Fink said: “Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being—what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.”
He added: “Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders of your company.”