BlackRock annual meeting reveals ‘cognitive dissonance’ on stakeholder capitalism implementation
New Statement on the Purpose of a Corporation
NEW YORK, NY—MAY 21, 2020—At the BlackRock annual general meeting today, shareholders asked the world’s largest asset manager for a plan on how they are planning to implement the Business Roundtable’s “New Statement on the Purpose of a Corporation.” The preliminary vote earned 3.85%, which exceeds the threshold needed to bring this new resolution forward in 2021.
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In his presentation of the proposal, Andrew Behar, CEO of the non-profit organization As You Sow, pointed out that, “We agree with The World Economic Forum, the Business Roundtable, and BlackRock on the path forward. This requires an alignment of words and actions. Yet historically, BlackRock has voted for nearly every egregious CEO pay package and against nearly every climate resolution. This cognitive dissonance is troubling.”
When asked, after the resolution was presented, why BlackRock did not support the proposal, Larry Fink, BlackRock’s CEO, seemed to endorse the proposal by saying, “A company’s ability to achieve its full potential and deliver to all stakeholders — its employees, its clients, its shareholders, and other communities — is imperative, you cannot have long-term profitability without that...and we believe that BlackRock already operates in accordance with the principles and commitments consistent with the Business Roundtable’s New Purpose.” However, he gave no implementation details appearing to believe that the New Purpose was already implemented, disregarding the many contradictions between words and actions highlighted in the proposal.
Andrew Behar, CEO of As You Sow, presented the resolution today. Here is full text of his presentation:
This shareholder resolution is of the utmost importance as it asks the critical question: How do words become actions?
In August 2019, the CEOs of 181 major corporations, including BlackRock, signed the Business Roundtable statement endorsing a new Purpose of a Corporation. The World Economic Forum then incorporated this framework into its new Manifesto. The new Purpose says that corporations exist for the benefit of all stakeholders — employees, customers, suppliers, communities, and shareholders. It rejects the notion that corporations — exist solely to serve shareholder profits.
The new Purpose is actually not so new. “Stakeholder capitalism” underlies every shareholder resolution filed over the past 50 years, beginning with nuns asking GM about its employees in Apartheid South Africa. At the same time, businesses broadly adopted a framework based on shareholder capitalism, which elevated profit over all other considerations.
Look at the world that this framework has produced. Our social fabric is shredded. Inequality and injustice are at unprecedented levels. Our oceans and atmosphere on the verge of collapse. Our food system is filled with carcinogens. This is not sustainable.
In stark contrast, a stakeholder-centric system can create a just and sustainable world. When a company treats its employees with dignity, retention is increased, reducing the cost of hiring and training. When products are clean and safe, they build customer loyalty. When supply chains are respected, negative brand associations are avoided. When communities are cared for, risks are reduced. All these elements of “stakeholder capitalism” lead to increased loyalty, decreased risk, and higher profits for shareholders — in short, good business.
We agree with The World Economic Forum, the Business Roundtable, and BlackRock on the path forward. This requires an alignment of words and actions. Yet, historically BlackRock has voted for nearly every egregious CEO pay package and against nearly every climate resolution. This cognitive dissonance is troubling. Therefore our proposal asks:
- Will BlackRock make the new Purpose of a Corporation legally binding?
- Will BlackRock assist the thousands of companies it invests in to implement the new Purpose?
- Will BlackRock use the power of its $7 trillion to vote in support of shareholder resolutions?
- As the world’s largest shareholder, will BlackRock defend its rights against restrictive rule-changes proposed by the SEC?
The answer to these questions will define the trajectory of the inevitable shift to a regenerative economy based on justice and sustainability that the New Purpose demands. Now is the time to turn words into action, to actively implement the ideas already agreed to, and create a just and sustainable economy for us and for our children