Mr. Lawrence Fink, Chief Executive Officer
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055-0003
Dear Mr. Fink,
Over the past year or so, thanks in part to the Business Roundtable’s sanctimonious adoption of it as the new “ideal” for American business, the term “stakeholder capitalism” has taken deep root in the business world. There are, we believe, several issues with this term, with its use, and with the effects it is intended to elicit among business leaders and business consumers alike. These issues loom even larger now, in the most challenging business environment since the Great Depression.
On the surface, this change in business-focus seems innocuous enough. In truth, however, it is this innocuousness that betrays the deception and the real agenda at the heart of this effort.
The word “stakeholder,” when used in this context, is intentionally nebulous. It can mean whatever the user chooses it to mean. And therefore, it means nothing.
Those of us who have run businesses, or who DO run businesses, know that being shareholder-focused entails a great deal more than our critics pretend. Being a manager or a director of a shareholder-focused company means balancing the needs of various constituencies, including: customers; employees; equity and debt investors, government agencies; and members of the local community. A successful business must harmonize the differing and often competing requirements of these constituencies, delivering value and consistency to customers and a productive and safe work environment for employees, all while meeting federal, state, local regulatory requirements and maintaining a positive presence in the community.
Additionally, we note that most American corporations are already, as practicable, quite forward-looking and concerned with long-term issues and prospects. As such, they strive not merely to meet, but to exceed environmental and other regulatory demands. The effective and profitable deployment of capital in our current regulatory environment is difficult enough. Adding another layer of risk to that decision-making process, thereby penalizing companies that are already going above and beyond, would be costly, destructive and, frankly, unfair.
Given all of this, we believe that any honest assessment of the successful “shareholder” model MUST acknowledge that it is inarguably stakeholder friendly as well. The distinction between the two models is purely cosmetic, an artificial construct purposefully fashioned to sow confusion and to permit its architects to pursue their own ends rather than those of American business.
In most cases, these ends are political. By adopting an explicitly “stakeholder”-centered model, activists are attempting to subvert the great American process of self-government, substituting their own views and beliefs for those of the people. By drawing a false distinction between shareholders and stakeholders, asset managers like BlackRock, CalPERS, and countless others intend to “target” corporations whose business models don’t meet their personal definitions of acceptable behavior. Whether done to intimidate corporations into toeing the vacuous and amorphous “sustainability” line, or to force “unacceptable” corporations out of business, the net effect is the same, namely the creation of an overtly ideological and extra-legal regulatory regime.
We acknowledge that the existing legislative and regulatory regimes in this country are messy and inefficient. But that, we believe, is a small price to pay for self-government. By supplanting the untidiness of democratic governance with their own regulatory standards, the advocates of “sustainability” and “stakeholder capitalism” may enforce greater order and may achieve their policy preferences, but they will do so at the expense of every free-born Americans’ birthright.
Additionally, and more to the point, asset managers who capitalize on Americans’ inherent goodness and decency to push their own values under the headings of “sustainability” and “stakeholders,” are playing politics with OTHER PEOPLE’S MONEY. An asset or wealth manager’s primary fiduciary responsibility is to his CLIENTS… to manage the CLIENTS’ assets faithfully and in keeping with the CLIENTS’ needs, values, and risk tolerance. Substituting one’s own political predilections for the obligations owed to the clients is among the most offensive and irresponsible actions a manager can take. This is all the more the case when the manager is not chosen by the individual investor but dictated by law, as is the case with government employee retirement and pension plans.
Particularly now, in the age of COVID-19, the related economic collapse, and exponentially expanding state budget deficits, it is absolutely imperative that state and public employee pension funds – most of which were woefully underfunded BEFORE the collapse, during the longest bull market in history – NOT be used to soothe the political consciences of asset managers hired by the state or the government officials responsible for assigning those contracts. These are benefits that have been promised to workers and HAVE ALREADY BEEN EARNED. To risk them in pursuit of political trends and fads is the height of irresponsibility.
Mr. Fink, on behalf of America’s business owners, managers, and directors, we ask you to consider the implications of your actions in your tenure serving within the structure of the Federal Reserve or with your role as CEO of BlackRock – for clients, for taxpayers, and for the long and successful tradition of American capitalism.
SIGNATURES (Affiliations for identification only):
David L. Sokol, Chairman ATLAS Corp, Owner, TETON CAPITAL, LLC
Tony Novelly, Chairman and CEO of Apex Oil Company, Inc.; Chairman, World Point Terminals, Inc.; Chairman, FutureFuel Corp.
Lawrence R. Simkins, CEO, The Washington Companies
Keith E. Sirois, President & Chief Executive Officer, Capital Management HPP. Inc.
Nathan Hancock, President, Hancock Int’l Corp & Chicago Freight, Inc.
Walter M. “Marty” Cummins Jr., President, Florida EB5 Investments LLC
Rudy Walldorf, President, Herman Walldorf Commercial, INC, C.C.I.M.
Kevin Freeman, CEO, Freeman Global Holdings
David Black, Ph.D., Founder, 2ndVote and 2ndVote Value Investments
Troy J. Andrews, CEO, Paradigm Midstream
James Blanchard, Retired Chairman & CEO, Synovus
Clinton Phillips, Chairman of the Board, Founder of Medici & 2nd. MD
Charles Bundren, CEO, Texas Southwest Business Services Group
Barry Meguiar, President, Ignite America
Rebecca Hagelin, CEO, United in Purpose
K.C. Craichy, Founder & CEO, Living Fuel, Inc., LivingFuel.com
Jon Gibson, CEO, Jon Gibson Company
Diane Black, Fmr. Member, U.S. House of Representatives, 2nd Vote Value Investments
Daniel Grant, CEO, 2nd Vote Value Investments, Inc.
Bernard Bertsche, Chairman, Camcraft Inc.
Alison Williams Hogan, Communications Consultant, Open the Gates Enterprises
Julie I. Nimmons, CEO, EXO Living, LLC
Robert Niehaus, Managing Director, Robert D. Niehaus, Inc.
Alex Brubaker, Director, Living Stones Foundation
Rod D. Martin, Founder and CEO, The Martin Organization, Inc.
Sherri R. Martin, Executive Vice President, The Martin Organization, Inc.
Haley E. Martin, President, The Martin Foundation
Guillermo J. Aragon, Chief Financial Officer, Martin Imaging, Inc.
Christina Murphy Lusk, Chief Development Officer, Martin Imaging, Inc.
Michelle C. Ward, Certified Health Coach, Shareholder
Bishop E.W. Jackson Sr., President, STAND Foundation, Inc.