Steve Pruneau and Asher Black weigh (in 12 minutes) the challenge by Texas Attorney General Ken Paxton and a cadre of oil and gas states to BlackRock CEO Larry Fink on sustainable investment vs. shareholder profit. Fink as Jedi in the #bossrebellion
A few months ago, the Texas Attorney General sent a letter off to BlackRock and Larry Fink, the c e o, essentially saying, through a long list of grievances, we don't really like how you're managing our investments. And by our, they're talking about the Texas Retirement Pension Fund, and also because it's coming from the attorney general.
Suggesting, Hey, you're, you're not handling your role as a fiduciary properly. They decided to take it up now, but BlackRock's been on this track for a really long time, essentially saying it's not about shareholder value only, it's about all stakeholders, which is. Number one, the environment, number two in society in general.
And when you break that down, you're talking about employees, uh, customers and so on. So what I really like about this discussion is while they're kind of going back and forth about a fiduciary this is really doing is it's defining what capitalism really is.
Asher Black:
It's a legal threat in a way to say you're not fulfilling your fiduciary responsibility.
There's the threat of possible criminal, but most likely civil suit, et cetera, because it's coming from the attorney general. And of course the states included are oil producing states, not coincidentally. And I, I think the debate is, , Steve, about sustainable capitalism and sustainable profit. Whether or not we could actually go on like this, in the long term or whether we only look at next year's report, next year's revenue, next year's,, share value, et cetera.
And so what I like what. About what BlackRock is doing is they're essentially saying, look, we are executing our fiduciary responsibility. We are being capitalists here, and we're being capitalists because we're taking the long view to maximize our, our profits in ala Warren Buffet, if you will.
So I like the point that Fink made , in his letter, which is that, you know, part of our fiduciary responsibility is to hold the firms in which we invest our shareholders capital , to be accountable to do what they say and they've already signed. To these commitments for zero emissions and, and for, for climate change and so on.
So, do we not want the companies with whom we do business, do we not want the companies with whom we entrust our inve, our shareholder's investment? to actually do what they say when they say, instead of paying lip service to sort of corporate accountability, don't we want a tangible commitment that's all about extracting value?
We extract value in the form of, of share value, but we also extract value in the form of that shares. Those shares will still be worth something in the long term to, to benefit our investors because the planet will still be here and life will still be, be worth living in this particular environment.
So I kind of, I like. Sustainable capitalism approach. He's basically saying, we're diehard capitalists, and this is what diehard capitalists has evolved into. It's broader, it's wiser and it's more holistic.
Steve Pruneau:
Yeah, I see. It's a, for me, it's a, it's a modern day ant versus grasshopper fable, you know the 19 attorneys general, the, the, you know, they collectively sent off the letter basically saying, we're the grasshoppers.
maximize value right now for us and, you know, let society handle the fallout. But, and, and when you look at, at the responsibility of a fiduciary, it's to run the plan solely in the interest of participants and beneficiaries of the plan. And so, of course an old school conservative 20th century view of that is shareholder value only, but what are the interests of the participants?
It's not just the money, right? It's that we actually have a, a market that we can operate in. He said something really interesting, on I think it was DealBook, where he is saying, look, we, most of our investors invest for their retirement. And you know, that's a really long horizon. And he's talking about multi-generational sustainable wealth.
So yeah, it's, it's this short-termism, which has been going on since the seventies versus, well, how do we make this work for every. .
Asher Black:
This letter throws around terms like you're using ideology and political and social extremism to govern our, our investors' money and not and not capitalism.
Of course, Larry Fink Defly refutes that with purely Adam Smith type arguments, which is fantastic. But I, I think underscoring this is the. , the, the distinction between the CEO as a leader and the CEO as an opportunist is the ceo, essentially merely an administrator who executes the will of the shareholder, whether it's short term, whether it's wise whether, whether it's thoughtful, simply does what he's told like a paid administrative assistant.
And looks for the latest opportunity to act and post good numbers. Or is the CEO a leader that is more thoughtful, reflective, takes time to look at the long-term value, the sustainability of that value, the retention of value, the maximum value for the shareholder in, in terms of, as you say, the length of time in which they're gonna have their money invested.
So that underscores the question of. Is not only is the CEO a leader, but is leadership. In fact, values based is all leadership, in fact, values-based leadership. Because inevitably it is the values of all of us, the values, starting with, of course, survival and having a sustainable future for, for us ourselves.
And those we love that are implied in in fink's. Are values allowed to drive what we do or and are those values being essentially reduced in the minds of people who are articulating a doctrine of short-term value to ideology when in fact the ideology is coming from those articulating the value of short-term value?
