15 Apr 2020 Conservatives Remind CEO of “Moral Imperative” of Sticking with Free Market Capitalism
A coalition of over 75 conservative leaders and elected officials have signed a letter to BlackRock’s Larry Fink, asking the influential CEO to “reconsider” his announcement that the investment management service “will operate under a ‘stakeholder’ model rather than the well-established ‘shareholder’ primacy model.”
Stressing their overall concern about this dramatic change in corporate focus, the signers note that this concern has been amplified by the “unexpected economic crisis” caused by the coronavirus pandemic:
This economic crisis makes it more important than ever that companies like BlackRock focus on helping our nation’s economy recover. BlackRock and others must not add additional hurdles to recovery by supporting unnecessary and harmful environmental, social and governance (ESG) shareholder proposals.
In his 2020 letter to fellow CEOs, calling “climate change” a “defining factor” for many businesses that may cause a potential need for “significant reallocation of capital,” Fink committed BlackRock to “plac[ing] sustainability at the center of our investment approach” and increasing the influence of non-investing stakeholders in corporate decision making.
Noting BlackRock’s job as a “steward of investors’ capital,” the coalition letter reminds Fink that “you must act in good faith and with a fiduciary responsibility to maximize returns for those investors.”
The letter to Fink explains:
Because of your experience and position, your actions influence not only the financial future of millions of Americans but also actions taken by other companies. In light of your influence, we are especially concerned that your support for some ESG shareholder proposals and investor initiatives brings political interests into decisions that should be guided by shareholder interests. Shareholders and society at large benefit when companies are guided by values such as producing quality products and services, having integrity in dealing with customers and vendors, and developing the talents and skills of employees. But when a company’s values become politicized, the interests of the diverse group of shareholders and customers are overshadowed by the narrow interests of activist groups pushing a political agenda.
Most ESG shareholder proposals are sponsored by activist groups that abuse the proxy process to achieve social and cultural changes that are entirely unmoored from the interests of corporate shareholders. Environmental nonprofits, labor unions, left-leaning pension funds, ESG-focused asset managers, and left-wing activists are unconcerned with corporate performance. Their goals are societal and political.
Furthermore, these ESG proposals will add an extra-regulatory cost on these companies requiring them to spend their shareholder capital. This may harm everyday Americans who are invested in these companies through pension funds and retirement plans. While this won’t affect folks in your income bracket, this may be the difference between affording medication, being able to retire, or supporting a family member’s education for many Americans.
But the letter points out that there is more than a fiduciary responsibility to investors that Fink seems to be ignoring. There is also a moral imperative at stake:
Free market capitalism has lifted more people out of poverty than any economic system in world history. That’s because, at its simplest level, capitalism operates under the basic rule that all exchanges are voluntary. Therefore, to achieve wealth and create growth in a capitalist system, one must appeal to the self-interest of others.
Should BlackRock and other companies continue focusing on “highly politicized trends and fads” during this economic crisis, this strategy could “exacerbate instability, when instability can least be tolerated.”
“During the best of times, the purpose of any business is to return a profit for shareholders by providing goods and services that consumers want and need,” the letter reads. “But especially during times of grave threat to the economic health of the nation, that purpose – and not a political agenda – should be top of mind for businesses and for investors.”
While addressed to Fink, a copy of the letter was also sent to Federal Reserve Chairman Jerome Powell.
The coalition letter to Fink was written by National Center General Counsel Justin Danhof, Esq. It was also signed by National Center President David A. Ridenour, Vice President David W. Almasi, Free Enterprise Project Coordinator Scott Shepard and Project 21 Co-Chairman Horace Cooper. Others who signed the letter include former attorney general Edwin Meese III, economics commentator Steve Moore, Competitive Enterprise Institute President Kent Lassman, McLaughlin & Associates CEO John McLaughlin and Turning Point USA Executive Director Charlie Kirk. Five former members of the U.S. House of Representatives also joined the letter: Tim Huelskamp (Kansas), Jim Ross Lightfoot (Iowa), Bob McEwen (Ohio), David McIntosh (Indiana) and Allen B. West (California).
To read the entire letter and see all of its signers, click here.