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What should CEOs consider in 2022? According to BlackRock: Stakeholder Capitalism; Social Purpose; and Public Engagement

Since 2012, Larry Fink, CEO of BlackRock, has written an open letter to CEOs of companies who are part of BlackRock’s portfolio. However, like other influential wall street voices of the past, his letters to CEOs have influence well beyond those investments under his management. Part of the reason that his letters have such influence is that, as the largest institutional investor in the world, BlackRock now boasts managing over $10 trillion in assets. In short, when Larry Fink speaks people tend to listen.

This year’s letter is about “stakeholder” capitalism, a company’s “social” purpose, and a call for CEOs to publicly engage on societal issues. The stakeholder capitalism he references is similar to that laid out by the Business Roundtable (BRT) in 2019. There, as BPC discussed, it was argued that successful companies don’t just look at profits and increasing value for shareholders, but rather look to their employees, suppliers, and the communities they operate as factors in their business decisions. It is debatable whether this was a new concept in 2019 or just a restatement of the position that to be successful, companies needed to take these other stakeholders into account.

Larry Fink goes on to address the fundamental principle of a corporate “purpose” and appears to advocate for a noteworthy change. No longer are companies to focus merely on their charter or “business” purpose, but rather companies should also have a “social” purpose. Importantly their CEOs should be a leading voice on societal issues because that’s what he believes stakeholders want. In particular, employees “are increasingly looking to their employer as the most trusted, competent, and ethical source of information – more so than government, the media, and NGOs.” However, elevating CEOs as an authority for information may not sit well with those that believe that social issues should be left to elected officials, and that a CEO’s role should be to address materially relevant stakeholders while maximizing shareholder value.

One concern with corporations addressing social issues is who determines the issues? Is it the CEO, the board, investors, or other stakeholders? Some argue that by focusing on materially relevant issues to a company’s long-term success collateral social issues can also be addressed. However, with the likely mandatory and prescriptive disclosure rules coming out of the SEC in the near term, CEOs that publicly weigh in on some societal issues, will certainly be pressured to make additional statements on other issues that may not be material to a company’s long-term success. This would almost certainly become more prevalent if CEOs become a “source of information.” Larry Fink argues that having a social purpose is not “about politics, or a social agenda, or even being woke.” However, the public perception of CEOs taking positions on social issues will likely be seen as a political or ideological agenda and may correspondingly have negative consequences.

Even if CEOs deftly navigate responses to social issues, a more fundamental question arises under a stakeholder capitalism model. How does a CEO decide which stakeholder takes precedent in making difficult decisions? For example, does a CEO keep an employee that should otherwise be terminated to support a societal good? In these inflationary times, should a CEO refuse to raise prices even though it may require pay cuts to employees? In deciding which store or plant to close, how will societal issues be factored into those decisions? In sum, which stakeholder takes precedent: the customer, the employee, the community, or some other stakeholder? These are fundamental questions that need to be answered if we truly are moving to a stakeholder system.

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Democrats and Republicans: Something in the letter for both political parties.

From a Democrat’s perspective his focus on labor and his position that “[w]orkers demanding more from their employers is an essential feature of effective capitalism” will be seen as promising for the future. His argument that companies should focus on deepening the bond with their workforce by addressing fair pay, racial equity, childcare, and mental health issues will also be music to their ears. Given that climate issues dominate the current Administration, his belief that transitioning to a “net zero world” should be the focus of every company will likely be greatly supported. And they will certainly be glad that he doesn’t just favor supportive rhetoric but rather specifically “asks” companies to set short-, medium-, and long-term greenhouse gas reductions and a plan to meet those goals.

On the other hand, Republicans will have a sign of relief that Fink publicly acknowledged that the “fair pursuit of profits is what animates markets.” Unless the goal is to convert all corporations to “benefit corporations,” profits are still seen as important for long term growth. With regard to climate policy, there will likely be support of his statement that the transition to a net zero world will be a long and costly process, and as a result “traditional fossil fuels like natural gas will play an important role…” Many Republicans believe that the much discussed “transition” is unrealistic without fossil fuels playing a vital part. Moreover, Fink indicated that “BlackRock does not pursue divestment from oil and gas companies as a policy.” While some believe that Fink’s past statements undermine this position, all one has to do is look at the portfolio of companies that BlackRock invests in, and this statement becomes less surprising. Lastly, Fink is also pushing reforms that would allow individual investors or groups of investors to have their voice heard at shareholder meetings, where increasingly activist shareholders are asking companies to address social issues. While not necessarily a Republican issue, as beneficiaries (think 401ks and pensions) learn that they have a say in how their investments are managed, it may well lead to a discussion over which strategy they want pursued: increase one’s retirement or address social issues, if you can’t have both.


Frankly, it could be argued that this year’s letter had something for everyone to contemplate. It thoughtfully laid out the issues that CEOs will be grappling with and gave a suggested course of action. It also supported various positions of both political parties, though rest assured there will be critics from both sides. However, some read the letter as an existential threat. For example, the state of West Virginia has pulled all their money from BlackRock’s management citing disagreements regarding BlackRock’s climate policy and their questionable investments in China. It is certainly possible that the state of West Virginia didn’t believe that Larry Fink had adequately and publicly explained the strategy behind its investment decisions in China and the corresponding social and economic impact it has had on the U.S. workforce or his position on climate policy and its effect on energy-related jobs in West Virginia.

Either way you look at it, this year’s letter has people talking again and, in this case, discussing what companies should do and publicly discuss.

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