Larry Fink’s Capitalist Shell Game

from Project Syndicate

BlackRock Chairman and CEO Larry Fink’s latest annual letter has taken the business world by storm. BlackRock is the world’s largest asset manager, and Fink, addressing the CEOs of the companies whose assets his firm manages on behalf of investors, took the opportunity to advocate a more ecologically sustainable, socially conscious, forward-looking form of capitalism rooted in stakeholder rather than shareholder value.

Fink’s exhortation seems like a welcome break from orthodox dogma. But if his vision is supposed to be “woke,” it is not nearly woke enough. We’ve heard all this before, including in Fink’s own 2018 and 2019 letters, and in the ballyhooed 2019 Business Roundtable statement that Fink helped spearhead. But far too little has changed, largely because the vision expressed by Fink and other corporate leaders stops short of the radical reforms needed to transform capitalism in the interests of people and the planet.

Fink’s version of stakeholder capitalism is based on conceptual sleight of hand. After all, his support for stakeholders is conditional on a secure profit pipeline for shareholders, which means that shareholder value remains the bottom line. Stakeholder value becomes merely a means to an end – to benefit shareholders in the long run. It is thus a betrayal of stakeholder capitalism’s true intent: to create value for public benefit.

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4 Comments

  1. It’s time to radically change how the American economic system is constructed. We need to evolve from shareholder capitalism to stakeholder capitalism. Although the way we have previously built and succeed as a global society has worked, we need to get to the next step. We need to radically change our goals and values if we want to survive our ecological crisis, and combat inequality. The World Economic Forum has announced that we can achieve these goals if we follow the Davos agenda and abide by the new regulations suggested in The Great Reset initiative.

    Larry Fink wants to join the bandwagon of CEO’s of large international corporations and pledge that Black Rock will become more conscientious of stakeholders. Unfortunately, unlike other corporate executives he is not genuinely prioritizing stakeholder interests. Mr. Fink still is prioritizing shareholder interests over the interests of stakeholders. In particular, Mr. Fink says he is helping to fight climate change by encouraging his clients to invest their money in sustainable investments. This is a step in the right direction, but the reason behind why he is encouraging them to invest in ESG funds (Environmental, social, and corporate governance funds, https://www.investopedia.com/terms/e/environmental-social-and-governance-esg-criteria.asp) is wrong. All Mr. Fink cares about is making his clients’ money. He has branded increasing corporate profits as environmentalism. This is wrong. Personal profit and corporate profits are not the goal of environmentalism. If Mr. Fink really wants to help save the planet, then he should be advocating for a carbon tax on companies which produce carbon emissions. This sinner’s tax would strongly encourage large corporations to reduce their carbon footprint. In the end, Environmentalism is not about making money, its about saving our planet from our own negative actions.

    Mr. Fink is defending the old system which brought us where we are now. He is not embracing the new system which will bring us where we are going next. Marc Benioff, Co-CEO of Sales force, has already stated that he believes that, “Capitalism as we have known it is dead” (https://www.yahoo.com/video/davos-2020-salesforce-founder-capitalism-is-dead-181643945.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAMt8Mm6NvFBWhLUC1wl02EXAP27Bl9qxuXrdWj90zZk_InEupPQ4xP4eFX5k5mTALtqBkIGwWH2cJeHlgnRs2PWaRYvo6-1CJrF_DbkrmBlyMkVGURN1H2iyFUJhy6IFSAHbhN_0MYZ0Eaa6DHvU2oESI1fqzkp7L1bNrkNnqPRR). It’s time for Mr. Fink and the rest of the global business community to learn that the old days of shareholder capitalism are soon to be gone. We need to deemphasize maximizing corporate profits, and rather focus on maximizing value for all stakeholders.

  2. It’s time to radically change how the American economic system is constructed. We need to evolve from shareholder capitalism to stakeholder capitalism. Although the way we have previously built and succeed as a global society has worked, we need to get to the next step. We need to radically change our goals and values if we want to survive our ecological crisis, and combat inequality. The World Economic Forum has announced that we can achieve these goals if we follow the Davos agenda and abide by the new regulations suggested in The Great Reset initiative.

    Larry Fink wants to join the bandwagon of CEO’s of large international corporations and pledge that Black Rock will become more conscientious of stakeholders. Unfortunately, unlike other corporate executives he is not genuinely prioritizing stakeholder interests. Mr. Fink still is prioritizing shareholder interests over the interests of stakeholders. In particular, Mr. Fink says he is helping to fight climate change by encouraging his clients to invest their money in sustainable investments. This is a step in the right direction, but the reason behind why he is encouraging them to invest in ESG funds (Environmental, social, and corporate governance funds) is wrong. All Mr. Fink cares about is making his clients’ money. He has branded increasing corporate profits as environmentalism. This is wrong. Personal profit and corporate profits are not the goal of environmentalism. If Mr. Fink really wants to help save the planet, then he should be advocating for a carbon tax on companies which produce carbon emissions. This sinner’s tax would strongly encourage large corporations to reduce their carbon footprint. In the end, Environmentalism is not about making money, its about saving our planet from our own negative actions.

    Mr. Fink is defending the old system which brought us where we are now. He is not embracing the new system which will bring us where we are going next. Marc Benioff, Co-CEO of Sales force, has already stated that he believes that, “Capitalism as we have known it is dead.” It’s time for Mr. Fink and the rest of the global business community to learn that the old days of shareholder capitalism are soon to be gone. We need to deemphasize maximizing corporate profits, and rather focus on maximizing value for all stakeholders.

  3. A capitalistic economy demands profits in order for it to run successfully. Without profit, there would be no incentive to keep the economy running. Most Americans are money hungry in nature, equating to the successful capitalistic economy that America is framed upon. For over 3 centuries America has been fine-tuning the art of capitalism. Capitalists have put everything and anything at stake to obtain profits. enslaving innocent people, killing native inhabitants of newly discovered lands to take them over, destroying the only planet sustainable for life thus far, no feat is too inhumane for the mindset of the capitalist. The biggest flaw of capitalism is the vast spread between shareholders and stakeholders. Most shareholders want their companies to profit not giving mind to the public value their company can possibly offer. Investors would rather a company allocate 5 billion dollars in capital expenditures to promote growth in the company than the company spends 2% of the CAPEX for public value. 2% of 5 billion equates to 100 million dollars. A donation of 100 million dollars to an impoverished country can help support millions of inhabitants. Luckily as of recent companies have been adopting more of an environmental, social, and governance-centric business model.
    ESG has become more popularised in investor sentiment towards a company. ESG is what a company is doing to position itself to support social and environmental problems. The problem is companies are not adopting an ESG friendly business model fast enough. These companies have caused misery and travesty for centuries. For a majority of companies to adopt an ESG friendly business model will take decades at the very least. The planet does not have much time before damages become irreversible. Global warming, world hunger, and potential war will not wait for companies to play catch-up. Trillion-dollar companies such as Apple and Microsoft, have the means of accomplishing stakeholder interests, without a detriment being caused to their balance sheets. Public investment into private companies has pioneered vital utilities that we all use today. There is no denying that, but companies can easily adhere to stakeholder interests while simultaneously being a for-profit company.

  4. Larry Fink, the CEO of Blackman Chairman is promoting stakeholder capitalism among the respected CEOs of companies that his firm manages the assets of. He also advocated that stakeholder capitalism can provide higher returns and secure a profit channel in the long term for shareholders. This contradicts the ultimate belief of capitalism which is to create value for public benefit within society.
    Stakeholder capitalism is a system and form of capitalism in which corporations are oriented to serve the interests of all their stakeholders and seek long term value creation. It is intended to take into account the needs of all the stakeholders and society.
    Several advantages of stakeholder capitalism include that consumers are demanding the process, the technique can have higher returns and the system has dramatically improved the socio-economic status and infrastructure of America. A recent analysis found that companies offering equitable worker pay and sustainable environmental impact generate a 6.4 percent higher return on equity compared to firms that don’t utilize stakeholder capitalism. In addition, consumers also support stakeholder capitalism with their spending. According to a Forbes survey, it was revealed 85% of consumers are willing to pay more for a product from a company that had stakeholders associated. Furthermore, the US poverty rate declined to 10.5% in 2019, the lowest since 1959.
    Some disadvantages include a widened gap of inequality and environmental dangers. Inequality has risen in America with the top 20% of highest earners taking home more than half of US income. Stakeholder capitalism plays a huge role in this fact. In addition, it is destroying the environment. Risky short-term operations are conducted which created a lot of profit. For instance, fossil fuel extraction generates a lot of money but is also very harmful to the environment and causes climate change.
    Stakeholder capitalism will be present in America as long as companies meet their profit expectations and consumers are in support of the system.

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