" Five years ago, the Business Roundtable’s Statement on the Purpose of a Corporation paved the way for countless activist-driven corporate policies that have created significant legal and reputational risks of tremendous concern for many companies. Corporate policy has been steered away from maximizing value to shareholders (and therefore company value/brand performance) and towards policies that effectively amount to side-taking on contentious issues within the public square, prioritizing political/social goals under the guise of ‘stakeholder capitalism’ while neglecting shareholder value.
Among the companies that have undergone this priority shift and experienced adverse consequences as a result, is BlackRock Inc., courtesy of CEO and BRT signatory Laurence Fink.1 Since its broad embrace of stakeholder capitalism, BlackRock has undergone policy shifts that evince an increasingly partisan and activist-driven corporate focus, and one that presents growing risks to management and shareholders alike.
Although the company has previously touted2 its investment in the energy sector, its leadership in climate initiatives designed to reduce carbon emissions has led to criticism from numerous states over its bias against the fossil fuel industry — more importantly, BlackRock’s participation in ESG initiatives has led states such as West Virginia,3 Oklahoma,4 and Texas5 to restrict the company from doing business with state entities. Buoyed by concerns over ESG-driven boycotts of the oil and gas industry, nine states have divested6 billions from asset managers including BlackRock. If these concerns are not ameliorated, more divestments might well follow. The choice to turn corporate policy away from shareholders and towards all stakeholders is also one that has sparked significant controversy in the broader consumer world. BlackRock is, in many center/right-leaning circles, considered the epitome of corporate America’s leftward drift. The company should examine what policies are fueling this perception.
BlackRock’s broad shift toward activism, while justifiable under the philosophy of stakeholder capitalism, is hardly justifiable under a traditional understanding of fiduciary duty. The embrace of stakeholder capitalism across operations has created a space in which corporate policies that take sides on the most contentious political/social issues of our day, even at the cost of client divestments, are acceptable. This calls into question not only the extent to which stakeholder capitalism is consistent with BlackRock’s fiduciary responsibilities,7 but the extent to which a shift away from fiduciary duty has created undue legal and reputational risks for both Board and Company."