Strategic CSR - BlackRock

The article in the url below reveals the challenges for organizations responding to multiple stakeholders with competing interests:

"BlackRock Inc. has lost a mandate worth €14.5 billion ($17 billion) with one of the largest pension funds in the Netherlands, amid concerns the world's biggest money manager isn't acting in the best interests of clients when it comes to climate risk. PFZW, which oversees about €250 billion ($290 billion), will instead rely on Robeco, Man Numeric, Acadian, Lazard, Schroders, M&G, UBS and PGGM to oversee an equity portfolio worth some €50 billion, a spokesperson for the pensions manager told Bloomberg on Wednesday."

The article suggests that, having been so outspoken on climate change in prior years, BlackRock has now created this conflict due to its willingness to retreat on previously umambiguous positions:

"PFZW is the latest asset owner to voice discontent with US money managers that have retreated from climate alliances amid an all-out assault on net zero policies by the White House. PME, another Dutch pensions manager, told Bloomberg earlier this year it's reviewing its mandate with BlackRock, valued at some €5 billion."

And, of course, each of BlackRock's stakeholders has its own set of stakeholders that are helping shape decisions and priorities in a ripple effect:

"Dutch pension funds have been under pressure from a local nonprofit, Fossil Free Netherlands, to end their ties with BlackRock. The 'Break with BlackRock' initiative asked savers to urge their pension funds to act, and thousands have done so, according to the nonprofit's website."

Inauthentic values that are applied inconsistently can earn short-term gains at the expense of long-term credibility, and with very real costs:

"PME's senior strategist for responsible investing, Daan Spaargaren, told Bloomberg the €57 billion pension manager's concern was that BlackRock wasn't doing enough to distance itself from the anti-climate rhetoric of the administration of US President Donald Trump. BlackRock and other US asset managers 'aren't condemning what Trump is doing and how he is operating and how he is handling issues like climate change and demolishing the judiciary,' Spaargaren said at the time. 'We are worried about that.'"

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

BlackRock Loses $17 Billion Mandate at Dutch Pension Fund PFZW

By Frances Schwartzkopff

September 2, 2025

Bloomberg

https://www.bloomberg.com/news/articles/2025-09-03/blackrock-dropped-by-pension-fund-pfzw-after-review-nrc-says

 

Strategic CSR - Larry Fink

This graphic produced by Bloomberg from the article in the url below is both interesting and frustrating:

It is interesting and frustrating for the same reason – because it reveals a superficial commitment to something that needs to be sustained and genuine. Fink had built a reputation for himself as someone who is committed to the sustainability cause. The chart reveals a superficiality to that commitment. I am all in favor of revealing the lack of thought that is invested in the latest term or acronym that gets the mainstream CSR conversation excited, but this very much suggests Fink is a victim of that superficiality, rather than having thought through what he was saying, and/or his and his company's ability to implement:

"[Larry Finnk's] 2020 letter mentions terms like climate, ESG and sustainability 46 times. But executives changed their tune after Texas and other US states launched attacks and legal action on the investment management company. 'Larry Fink used to talk quite a bit (in fairly short letters) about climate, sustainability, and ESG. … Now he does not.'"

Either way, it is another step backwards, when we need to be moving forward.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e  

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Wild Cards for the Green Transition

By Aaron Clark

February 3, 2025

Bloomberg

https://www.bloomberg.com/news/newsletters/2025-02-03/wild-cards-for-the-green-transition

 

Strategic CSR - BlackRock

A picture can tell a thousand words – specifically, a graph from the article in the url below about how BlackRock CEO, Larry Fink, has stopped publicly using the acronym, ESG. Of course, here in the U.S., there is a controversial ideological argument around the acronym. Equally important (and a symptom of that broader discussion) is how investors are voting with their dollars:

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

BlackRock Retreats From ESG Following Pushback

By Jack Pitcher and Amrith Ramkumar

March 4, 2024

The Wall Street Journal

Late Edition – Final

A1, A6

https://www.wsj.com/finance/investing/step-aside-esg-blackrock-is-doing-transition-investing-now-59df3908

Strategic CSR - Ben & Jerry's

The article in the url below presents a different take on the debate around the extent to which companies should engage in discussions around social issues:

"Companies ranging from Anheuser-Busch to Disney and BlackRock have recently lost loyal customers and billions of dollars in market capitalization and assets after wading into controversial political issues. The reason customers left and investors bailed is simple: These companies failed to carry out what they had promised in their mission statements."

In essence, the argument is that companies should, first and foremost, stay true to their founding mission, and that it is when they diverge that confusion is caused. Anheuser Busch's mission, for example, is to "Dream Big to Create a Future With More Cheers," while BlackRock promises to "to help more and more people experience financial well-being," both of which suggest a more neutral foundation:

"Clear mission statements are critical for company success. A 2016 Harvard Business Review study found that companies that clearly establish their purpose innovate more successfully and increase revenue faster than companies that don't. That's because clear mission statements explain why a company exists and what it hopes to achieve. They also identify its present—and, ideally, future—customers. This aligns internal employees and external investors in pursuit of a common goal: delivering great products and services to increase shareholder value."

Disney is another example of a company that has gotten itself into trouble, of late, with what some see as a confounding of its guiding purpose:

"[Disney's] stated mission is 'to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world's premier entertainment company.' Creating movies like 'The Lion King' and 'Star Wars' is on mission. Less so is public criticism of such legislation as Florida's Parental Rights in Education Act, which prohibits the state's educators from teaching about sexual orientation and gender identity in classes from kindergarten through third grade. When Disney announced its opposition to the bill in 2022, the majority of its customers disagreed. Disney's public approval rating cratered to 33% in 2022 from 77% in 2021. Customers spoke with their wallets. The company's streaming service, Disney+, saw canceled memberships, and attendance at Disney theme parks suffered. The company's stock remains depressed even after it swapped in new leadership."

Ultimately, the author is arguing that there should be alignment between mission and behavior. Stakeholders engage with a company based on an understanding of what it is that the company does. If the company suddenly diverges from that, however well-intentioned, then it will confuse stakeholders who had been engaging based on alternative assumptions:

"Anheuser-Busch, Disney and BlackRock could learn about proper mission control from Ben & Jerry's. The ice-cream company has been aligning customers and shareholders behind a progressive and social mission for decades. Its mission states: 'We believe that ice cream can change the world. We have a progressive, nonpartisan social mission that seeks to meet human needs and eliminate injustices in our local, national, and international communities by integrating these concerns in our day-to-day business activities.' When Ben & Jerry's supports returning to Native Americans what it claims is stolen land, when it advocates overturning voter-integrity laws, or when it favors defunding the police, its customers aren't surprised. This is because Ben & Jerry's has been advocating such change since two Vermont hippies founded the company in 1972. When they sold the business to multinational conglomerate Unilever in 2000, they maintained an independent board to make decisions on the company's social mission. Their customers expect this activism and buy such ice-cream flavors as 'Save our Swirled' and 'Empower Mint' to support social causes."

For me, the takeaway is that companies need to be founded based on a strong set of values, and those values should be conveyed to stakeholders clearly, from day 1. That authenticity is what binds stakeholders to companies, because the relationship is based on transparency and trust. It is when companies diverge, often for superficial reasons because they feel pressured to comment/act on the topical issue of the day, that problems arise. A company staying true to its values means refusing to engage in certain issues unless they are consistent with what the firm has believed and how it has acted, all along.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

© Sage Publications, 2023

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Why Woke Works for Ben & Jerry's

By Anson Frericks

August 9, 2023

The Wall Street Journal

Late Edition – Final

A17

https://www.wsj.com/articles/why-woke-works-for-ben-jerrys-esg-corporate-mission-statement-shareholder-value-a188402c

 

Strategic CSR - Unilever

I am divided on the importance of the article in the url below – an announcement by Unilever that it plans to give shareholders a regular vote on its sustainability plan (see also Strategic CSR – Unilever):

"Unilever PLC said it would become the first major company to voluntarily give shareholders a vote on its efforts to reduce carbon emissions, seeking greater engagement with investors on climate issues."

On the one hand, it is inflating the importance of shareholders in company decisions, while not giving a similar level of access/influence to other stakeholders. On the other hand, however, it is an acknowledgement that Unilever feels the issue of sustainability has evolved to the point where it will generally win these votes; it also is a smart strategic move to wrest the initiative away from shareholders and control the way debates on this issue are handled at the firm's AGM:

"The owner of Dove soap and Ben & Jerry's ice cream said Monday it would seek approval from investors every three years on its plan to mitigate its carbon impact and the risks of climate change on its business. However, the vote would be only advisory and doesn't require Unilever to make changes. Major investors say they are putting more emphasis on addressing the threats posed by climate change, with shareholder resolutions on the issue becoming more common. By proposing its own climate resolutions for shareholders to vote on—which take into account the challenges and realities of achieving them—Unilever is in the driving seat, said one big investor."

And, then again, perhaps Unilever is just resigned to the inevitable:

"BlackRock Inc., one of Unilever's largest investors, said earlier this year that it would be increasingly likely to vote against management and boards if companies don't disclose climate-change risks and plans in line with key industry standards."

Alternatively, perhaps it is better for Unilever to proactively instigate this change, which allows it to constrain the vote as "advisory" only, while continuing to stretch its own performance on this issue:

"A Unilever spokeswoman said investor interest in managing the transition to net zero was growing and that the company wanted to send a signal that it was serious about meeting these targets."

Either way, the timing of the announcement was fortuitous, given yesterday's announcement by the SEC that it will start requiring firms to report the environmental impact of operations and the risk climate change poses to the business. Unilever is more progressive on such issues than most companies – a position that is reflected in the timelines and targets the firm is pursuing:

"The consumer-goods giant is among the growing number of companies setting public targets for cutting carbon emissions over the next few years. London-based Unilever has promised to eliminate emissions from its own operations by 2030 and to do the same from sourcing to point of sale by 2039. It also plans to halve the footprint of its products in the next decade, which involves the more difficult process of cutting emissions from consumers using its products."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Unilever Allows Climate Input

By Saabira Chaudhuri

December 15, 2020

The Wall Street Journal

Late Edition – Final

B6

https://www.wsj.com/articles/unilever-to-give-investors-advisory-vote-on-climate-change-plan-11607971421

 

Strategic CSR - Shareholders

The article in the url below continues to challenge the prevailing narrative in large sections of the media and academia that stakeholder capitalism has arrived:

"Chief executives love to talk about 'stakeholder capitalism.' But when they face a final choice to sell a company and divide the spoils between workers and shareholders, guess who gets the money? You got it: Shareholders are the winners—along with the executives themselves."

A constant distortion of the decision making inside companies continues to be the structure of compensation, which defaults primarily to share price (via stock options). And, again, it is academics in the law school that are taking the lead in exposing the apparent hypocrisy among businesses:

"An analysis of takeover deals during the pandemic by academics at Harvard Law School reveals the priorities of America's corporate leaders. In public, they talk about the importance of employees, communities, the environment and other stakeholders in the business. In private, they negotiate deals they know will lead to job losses and closed offices but don't demand compensation for the losers."

The conclusion, of this author at least, is depressingly familiar:

"Stakeholder capitalism has turned out to be standard shareholder capitalism, with a smiley face. That should be a wake-up call for those listening to high-profile investors such as BlackRock Chief Executive Larry Fink, who wrote to fellow CEOs in January to advocate having a corporate purpose, and announced the creation of BlackRock's 'Center for Stakeholder Capitalism.'"

Specifically, the research demonstrates that:

"Out of 116 takeovers of companies worth more than $1 billion since April 2020, precisely none included any legally binding protection of jobs or guaranteed compensation for those who would be laid off. By contrast, executives of the target firms were able to negotiate an average takeover premium of 34% for shareholders, compared with the pre-deal price. As well as the gains on the stock they held, 98% of deals offered executives a takeover payout of some kind, and just under half changed compensation terms to reward top management further."

And, twisting the knife:

"The crumbs thrown to stakeholders were explicitly unenforceable, except for a tiny amount of required bonuses. The required and nonbinding bonus pools provided for in deal terms together amounted to 0.4% of the gains made by shareholders from the takeover, according to [the research paper]."

Where there are shifts, the author argues (persuasively, I think), they are driven by market forces, rather than any reconsideration of the values underpinning many of the corporations that signed the BRT statement (see Strategic CSR – BRT), as well (of course) of those that were not signatories:

"What's changed is that workers and customers, helped by social media and tight labor markets, are able to demand more from companies on issues they once let slide. When employees can easily find a job elsewhere, and customers are able to organize boycotts with a few tweets, it is easier to press complaints about child labor in the supply chain, treatment of minorities and women, carbon emissions and crass executive comments. Companies vulnerable to such issues—not all are, but most—need to pay attention, and are increasingly dressing up such attention as 'stakeholder' concerns."

The ultimate conclusion?

"… don't be fooled. CEOs still care primarily about the bottom line (and their bonus), because that is what they are motivated to care about. They will pay attention to stakeholder concerns only to the extent that they affect that bottom line, and in a takeover they rarely matter."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Shareholders Reign Supreme Despite CEO Promises to Society

By James Mackintosh

February 11, 2022

The Wall Street Journal

Late Edition – Final

B1, B10

https://www.wsj.com/articles/shareholders-reign-supreme-despite-ceo-promises-to-society-11644496644

 

Strategic CSR - Shareholder democracy

Count the article in the url below as another strike against the idea of shareholder democracy here in the U.S. Specifically, the article discusses an interesting practice that I was unaware of – share lending:

 

"[Investment firms, such as BlackRock, Vanguard, and Fidelity, who commonly hold a large percentage of a listed firm's shares] loan shares through brokers and intermediaries who act for clients unknown to the original lenders. Short sellers often borrow those shares to bet against companies, paying fees to funds that supply them with those shares. Those fees get passed back to fund investors."

 

While this is a good source of income for the funds (particularly in times of low yield, such as these), the result is that the funds are not able to use the votes associated with the loaned shares at the focal firm's annual general meeting:

 

"Investors from hedge funds to pensions make these tradeoffs all the time. For the biggest asset managers, the decision can occur on a massive scale as these firms direct trillions of dollars for investors."

 

This is particularly interesting choice for funds such as BlackRock, that have made so much noise about forcing executive teams to respond more directly to the firm's broad set of stakeholders:

 

"While investing giants have raised their voices to prod companies to address society's most pressing problems, they sometimes decide not to control the ballots that drive change. Their choice to loan out shares in some of the heavily shorted companies breaks with many people's assumption that firms overseeing economic interests in companies will cast full votes to maximize the value of the shareholdings."

 

The funds are clearly focused on the fees associated with this lending practice, while the result can be influential in determining the outcome of shareholder ballots:

 

"Many managers typically don't retrieve shares that have been lent out unless they think their vote is worth giving up income from lending out shares. The shares they put on loan are conduits for short selling. [For example,] In the last two weeks of April, GameStop has roughly 90% of shares outstanding sold short."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

Investing Giants Cede Full Vote Power

By Dawn Lin

June 11, 2020

The Wall Street Journal

Late Edition – Final

B1, B10

https://www.wsj.com/articles/how-investing-giants-gave-away-voting-power-ahead-of-a-shareholder-fight-11591793863

also in full, here:

https://www.morningstar.com/news/dow-jones/202006111673/investing-giants-cede-full-vote-power-wsj

 

Strategic CSR - Journalists

The article in the url below from the early quarantine days of the COVID-19 pandemic accurately captures much of what is wrong with current understandings of CSR/sustainability by companies (and the business journalists that cover them):

 

"Today, every occupant of every C-suite is trying to figure out what they're willing to throw overboard as the economic storm spawned by the pandemic is swamping their ships. Businesses that were planning to save the world are now simply saving themselves."

 

First of all, of course, "saving the world" is not what CSR/sustainability means in any kind of practical sense, firm-by-firm. Of course, there is an aggregate effect (which is yet to be net-positive), but each firm intends primarily to take care of its own operations (and, hopefully, clean up after itself).

 

Second, it is wrong to talk about corporations as "saving themselves," as if they are somehow independent from the society in which they are based. Firms and societies are one and the same, inseparable, and it is really quite ignorant to conceive of them as anything else. We do not live in a them and us world, where the corporations are the 'them' and we are the 'us.' Last time I checked, corporations are constituted by people who live in societies, are consumers, read newspapers, vote for politicians, and so on. We are all stakeholders and, together, we are all corporations.

 

Third, and most importantly, it is not possible to "throw overboard" something that is integral to a firm's business. Whether in a global lockdown or the 'normal' business cycle (whatever that now means), the goal for any organization is always the same – to create value for its broad set of stakeholders. If that is done, then the organization will thrive. If it is not done, however, or if a minority of stakeholders is privileged at the expense of the majority then, eventually, the organization will go away because it is no longer creating sufficient value for society. So, while the nature of the 'value' for stakeholders will shift, whether prompted by a global pandemic or simply the natural evolution of norms and expectations, the fact that organizations need to identify that value and create it for their stakeholders will always be the same. That is what 'responsible' behavior looks like for a corporation, whatever the age in which it is operating:

 

"When the financial crisis hit in 2008, companies again went into survival mode. … As the economy roared back, CSR became chic. Investors like BlackRock Inc. pushed for more sustainable practices. Retailers and restaurants reduced waste because customers were willing to pay for greener options."

 

The analysis is wrong, but the last sentence holds the key. It is not about trends; it is about stakeholder value creation. If sustainability is something that stakeholders value and are willing to support, then that is what firms will do and those that are best at it will be rewarded the most for their actions.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

Sustainability Is The First Thing to Go

By John D. Stoll

May 2-3, 2020

The Wall Street Journal

Late Edition – Final

B5

https://www.wsj.com/articles/sustainability-was-corporate-americas-buzzword-this-crisis-changes-that-11588352181

 

Strategic CSR - SASB

The article in the url below contains some interesting information that I did not know about the Sustainability Accounting Standards Board (SASB). First, is the organization's financial backers:

 

"[Michael] Bloomberg bankrolled the outfit, which was founded in 2011, to impose his enlightened political and cultural values on American corporations. SASB drew more attention in January when BlackRock CEO Larry Fink threatened to use his firm's massive ownership stakes to oppose corporate managers who fail to follow the board's standards."

 

Second, is the widespread potential for abuse of SASB standards, particularly in terms of the selective use of those standards:

 

"Materiality is essentially a progressive term of art. SASB's standards vary across 77 industries based on what its 'stakeholders'—academics, attorneys, auditors, asset managers and businesses—consider important. Greenhouse-gas emissions are 'material' to food and beverage companies but not to those that make consumer goods. Safeguarding customer welfare is important for health insurers though oddly not for airlines or banks."

 

The standards are very specific, even while they are grappling with metrics that are very challenging to quantify:

 

"SASB also directs companies to collect and report detailed data on everything from their share of recyclable and compostable packaging to the gender and racial composition of their workforce. Online retailers have to disclose their greenhouse-gas footprint and 'behavioral advertising,' among dozens of other things. Internet companies must report the results of employee engagement surveys. Beverage makers have to account for their revenue from zero- and low-calorie, no-added-sugar and artificially sweetened drinks. Should companies count drinks sweetened with Stevia as 'artificial,' zero-calorie or no-added-sugar? And who should make this decision?"

 

Unfortunately, while plenty of firms are willing to claim the legitimacy associated with the SASB standards, much fewer are willing to surrender to the standards in their entirety and their specificity:

 

"More than 130 companies claim to report information according to SASB guidelines, but their disclosures aren't standardized like corporate financial disclosures. Companies sometimes omit information they say is proprietary or immaterial while highlighting other data as a mark of their sustainability. Mr. Bloomberg's company, Bloomberg LP, chooses not to report the number of data breaches as SASB standards require, though this seems to be more material information than its renewable-energy consumption, which it does report."

 

Perhaps even more worrying:

 

"SASB standards can obfuscate poor financial performance. A company can claim it is 'sustainable' even if it is bleeding money, and keep drawing investment dollars from the ESG crowd. Executives may also hope that disclosing favorable information about their workforce diversity or carbon emissions will forestall criticism of other business practices, such as opposition to unions."

 

In other words, if a firm gets to choose which sustainability standards it adheres to, then the chances are that it is not being sustainable.

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Bloomberg Sells 'Sustainability,' but Buyer Beware

By Allysia Finley

March 3, 2020

The Wall Street Journal

Late Edition – Final

A17

https://www.wsj.com/articles/bloomberg-sells-sustainability-but-buyer-beware-11583193439

 

Strategic CSR - BlackRock

The article in the url below comments on Larry Fink's recent annual letter to CEOs that has received so much media attention. As CEO of BlackRock, "the world's largest asset manager with nearly $7 trillion in investments," Fink's opinions clearly matter, and he has increasingly embraced more of a stakeholder perspective to firm management (e.g., see Strategic CSR – BlackRock):

 

"Laurence D. Fink, the founder and chief executive of BlackRock, announced Tuesday that his firm would make investment decisions with environmental sustainability as a core goal. … this move will fundamentally shift its investing policy — and could reshape how corporate America does business and put pressure on other large money managers to follow suit."

 

So, the key question is, Will this announcement indeed "reshape how corporate America does business"? On the one hand, saying publicly that climate change represents a risk to companies and, therefore, a risk to the shareholders of those companies is hardly demonstrating great insight. In fact, you could argue that the biggest aspect of this story is that it is, in fact, a story when, to anyone paying the slightest bit of attention, this has been obvious for many years (decades?). On the other hand, however, it still matters when the CEO of one of the world's largest investment groups alters their position in a direction that advances the debate. Specifically in this year's letter, Fink focuses on sustainability and commits to ensure BlackRock's investments from now on will favor those firms that are more sustainable:

 

"[Fink] said BlackRock would begin to exit certain investments that 'present a high sustainability-related risk,' such as those in coal producers. His intent is to encourage every company, not just energy firms, to rethink their carbon footprints."

 

In addition to demanding greater transparency on climate issues/performance and divesting from firms that earn a significant percentage of profits in coal-related industries, Fink pledged to introduce new funds that closely adhere to this positive sustainable vision:

 

"[BlackRock], he wrote, would also introduce new funds that shun fossil fuel-oriented stocks, move more aggressively to vote against management teams that are not making progress on sustainability, and press companies to disclose plans 'for operating under a scenario where the Paris Agreement's goal of limiting global warming to less than two degrees is fully realized.'"

 

One concern is that, at this time, it is not immediately clear how BlackRock is going to determine which firms are considered 'sustainable' and which firms are not. Perhaps more critical, however, is that although this statement sounds progressive, implementing the vision across its stable of investments is going to be difficult given BlackRock's business model. As the article in the second url below notes:

 

"In a stroke, Larry Fink became one of the most powerful champions of green investing in global finance. But behind his new sustainable-investing push at BlackRock Inc. lies an uncomfortable truth: going green won't be easy or quick. Today BlackRock funds hold a 6.7% stake in Exxon Mobil Corp., for instance, as well as 6.9% in Chevron Corp. and 6% in Glencore Plc. And, in all likelihood, they'll keep holding them, for the same reason that BlackRock is so big and successful: two thirds of its roughly $7 trillion in assets are squirreled away in funds that passively track market indexes, rather than actually pick stocks or bonds."

 

So, in short, there are at least two reasons to be skeptical as to whether BlackRock's announcement will have much of an impact. The primary reason, as noted above, is that much of the firm's $7trn in investments is locked-up in passive index funds (at least $2trn) that, by definition, permit zero control over the allocation of capital (so, no real incentive for firms to change?). Moreover, the concentrated ownership the passive model promotes also tends to disincentivize competition (see here). Second, related to the measurement issue, is how BlackRock is going to decide which management policies/practices to support and which to vote against. In other words, how is it going to decide what constitutes 'sustainable' behavior? Already, some analysts are predicting that the firm will not even be able to meet its commitment about coal producers, let alone its more aggressive targets. Either way, while this announcement may be good business and excellent PR, it seems that it will do little to shift the needle on climate change, when what we need is dramatic action, and quickly. As the first article quietly buries further down the article:

 

"Because of its sheer size, BlackRock will remain one of the world's largest investors in fossil-fuel companies."

 

For now, therefore, I am filing BlackRock's announcement under the category of greenwash and will watch to be (hopefully) proven wrong. As the article in the third url below suggests, the firm's past record does not provide much reason for hope. For example, "the pledged coal divestments … are less than 0.1% of BlackRock's assets." More damning:

 

"In 2019 [BlackRock] opposed 93% of shareholder resolutions in America urging companies to become greener, compared with an industry average of 56%, according to Morningstar, a research firm. It only recently joined Climate Action 100+, a coalition of asset managers that presses big polluters to clean up."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

© Sage Publications, 2020

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler5e 

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

New Lodestar for BlackRock: Climate Crisis

By Andrew Ross Sorkin

January 14, 2020

The New York Times

Late Edition – Final

B1, B6

https://www.nytimes.com/2020/01/14/business/dealbook/larry-fink-blackrock-climate-change.html

BlackRock's Uncomfortable Truth: Going Green Won't Be Easy

By Annie Massa

January 14, 2020

Bloomberg Businessweek

https://www.bloomberg.com/news/articles/2020-01-14/blackrock-s-uncomfortable-truth-going-green-won-t-be-easy

Green giant

January 18, 2020

The Economist

Late Edition – Final

72

https://www.economist.com/business/2020/01/18/big-oil-has-a-do-or-die-decade-ahead-because-of-climate-change

 

Strategic CSR - Shareholder resolutions

The articles in the two urls below present different perspectives on the same issue – a proposal from the Trump administration to raise the threshold of share ownership before an individual investor can table a shareholder resolution at a firm's AGM:

 

"A proposal in the Financial Choice Act passed by the U.S. House of Representatives to increase the required threshold of stock ownership to present resolutions at annual general meetings would … [raise] the threshold to 1% of shares held for at least three years from the current rule of owning at least $2,000 in shares for one year."

 

Critics have noted the timing of the rule change, coming on the back of a successful year for such resolutions:

 

"[The proposal] may just be a backlash to the trend of large institutional investors being more active in their demands around governance, environment and social issues. … This proxy season, a record number of resolutions on disclosure over climate risks got majority support against a board recommendation, as large institutional investors such as BlackRock voted with the proponents."

 

Perhaps not surprisingly, the WSJ article is more in favor of the proposal, arguing that, at present, a minority of total shareholders submit the majority of resolutions and, in the process, use a lot of firm resources:

 

"According to the Business Roundtable, 'only three shareholders and their families were responsible for nearly 22% percent of all non-management shareholder proposals submitted to Fortune 250 companies in 2016.'"

 

In contrast, The NYT argues against the proposed rule change because it will constrain significantly the ability of shareholders to voice their concerns:

 

"One percent may not sound like much, but it can be enormous. Consider Exxon Mobil. It has 4.2 billion shares outstanding, so the 1 percent threshold would mean an investor would have to own 42 million shares, worth $3.4 billion, to be able to submit a proxy proposal. Exxon Mobil has throngs of institutional investors, but only the top seven holders would meet the threshold. And many of these institutions — such as Vanguard, BlackRock and State Street — have been unwilling to challenge company management historically, exactly what submitting a shareholder proposal involves."

 

Take care

David

 

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

© Sage Publications, 2017

 

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 

 

Choice Act Fuels Debate over Shareholder Proposals

By Mara Lemos Stein

June 20, 2017

The Wall Street Journal

https://blogs.wsj.com/riskandcompliance/2017/06/20/the-morning-risk-report-choice-act-fuels-debate-over-shareholder-proposals/

 

Meet the Legislation Designed to Stifle Shareholders

By Gretchen Morgenson

June 18, 2017

The New York Times

Late Edition – Final

BU1

https://www.nytimes.com/2017/06/16/business/wells-fargo-clawback-fair-choice-act-shareholders.html

 

Strategic CSR - Hillary Clinton

It will not be many times this election cycle where The Wall Street Journal praises a policy statement by Hillary Clinton. It happened, however, after Clinton's economic speech at NYU over the summer:

 

"Whatever one may think about her policy proposals, Hillary Clinton has put her finger on a real problem: Too many CEOs are making decisions based on short-term considerations, regardless of their impact on the long-run performance of their firms."

 

In order to steady their readers from the shock, the WSJ quickly seeks support for Clinton's ideas from more 'legitimate' sources:

 

"Don't take my word for it. Laurence Fink is the chairman of BlackRock, the world's largest investment fund, with $4.8 trillion under management. In a much-discussed letter to the Fortune 500 CEOs last year, Mr. Fink expressed his concern that 'in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies,' choosing instead to reduce capital expenditures in favor of higher dividends and increased stock buybacks. Such decisions, Mr. Fink warned, can 'jeopardize a company's ability to generate sustainable long-term returns.'"

 

The practice of buybacks is a particularly good example of distorting market forces (i.e., inflating share prices) for self-interested gains (i.e., stock-option-based compensation):

 

"As recently as 1981, buybacks constituted only 2% of the total net income of the S&P 500. But when economist William Lazonick examined the 248 firms listed continuously in this index between 1984 and 2013, he found an inexorable rise in buybacks' share of net income: 25% in the 1984-1993 decade; 37% in 1994-2003; 47% in 2004-13. Between 2004 and 2013, some of America's best-known corporations returned more than 100% of their income to shareholders through buybacks and dividends."

 

While personal financial gain is one motivation that at least conforms to expected behavior, knowingly damaging the company in order to cover-up poor performance seems to be a whole new level of corruption:

 

"When given the chance to speak confidentially, moreover, company executives contradict the capital-redeployment story. … a 2005 survey of CEOs and CFOs in the Journal of Accounting and Economics found that to avoid missing their own quarterly earnings estimates, 80% were willing to forego research-and-development spending, and 55% were willing to delay promising long-term projects that met their firms' internal return-on-investment requirements. A recent McKinsey survey yielded similar results."

 

Even worse, such self-serving behavior appears to be combined with law breaking (e.g., insider trading):

 

"As stock options and awards have surged as a share of total executive compensation, studies have found links between the timing of repurchases and the vesting dates of stock-based compensation. One study even found that executives often appear to time the release of good news to maximize the value of their own noncash compensation."

 

So, well done to the WSJ for acknowledging Clinton's efforts to bring attention to these damaging practices. Where the article diverts from the arguments underpinning strategic CSR, it is in terms of the reasons for correcting this behavior. While the article asserts the need to reinstate "a formula for maximizing shareholder value," I would prefer firms to focus on creating value for their stakeholders, broadly defined.

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

Hillary Gets It Right on Short-Termism

By William A. Galston

July 29, 2015

The Wall Street Journal

Late Edition – Final

A11

http://www.wsj.com/articles/hillary-gets-it-right-on-short-termism-1438124913

 

Strategic CSR - BlackRock

The article in the url reports on an open letter sent by the CEO of BlackRock to "the chief executives of 500 of the nation's largest companies." BlackRock is the world's largest asset management company (managing more than $4 trillion), which makes it a very important shareholder:

 

"The sender of the letter is Laurence D. Fink, chief executive of BlackRock. … He is planning to tell the leaders that too many of them have been trying to return money to investors through so-called shareholder-friendly steps like paying dividends and buying back stock."

 

While it would seem to be in Mr. Fink's interest to have firms paying dividends and buying-back shares; due to its investment strategy, BlackRock is more concerned with the long-term health of the overall market:

 

"'The effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,' Mr. Fink writes in the letter. He says that such moves were being done at the expense of investing in 'innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth.'"

 

Rather than a sign that companies are acting in their shareholders' best interests, BlackRock sees excessive funds spent on dividends and buybacks as evidence that senior executives have run out of ideas:

 

"United States companies spent nearly $1 trillion last year on stock repurchases and dividends. … Rather than consider the return of all this money to shareholders positively, Mr. Fink says the move 'sends a discouraging message about a company's ability to use its resources wisely and develop a coherent plan to create value over the long term.'"

 

Mr. Fink does not blame CEOs for the lack of creativity, however. Instead, he blames investors for the short-term constraints they place on management, which prevents them from doing their jobs:

 

"'Investors need to focus on long-term strategies and long-term outcomes,' Mr. Fink said, suggesting we're currently living in a 'gambling society.'"

 

Moreover, he has a good suggestion of how to improve the situation:

 

"He recommends that gains on investments held for less than three years be taxed as ordinary income, not at the usually lower long-term capital gains rate, which now applies after one year. … 'Since when was one year considered a long-term investment? A more effective structure would be to grant long-term treatment only after three years, and then to decrease the tax rate for each year of ownership beyond that, potentially dropping to zero after 10 years.'"

 

While such a change would undoubtedly suit BlackRock's investment strategy, Fink seems genuine in his critique of the damage done by an overly short-term perspective – an affliction that affects much more than investment decisions:

 

"To Mr. Fink, the shortsightedness that pervades corporate America is just a symptom of a larger issue. 'This is not just a corporate problem,' he said. 'It's a societal problem, whether it's health care or politics or business.'"

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

 

 

A CEO Urges Others to Stop Being So Nice to Investors

By Andrew Ross Sorkin

April 14, 2015

The New York Times

Late Edition – Final

B1

http://www.nytimes.com/2015/04/14/business/dealbook/blackrocks-chief-laurence-fink-urges-other-ceos-to-stop-being-so-nice-to-investors.html