BlackRock’s Transfer of Power
Larry Fink is transferring more power to some of BlackRock’s biggest clients.Credit…Damon Winter/ The New York Times
The right to vote
Larry Fink, the C.E.O. of BlackRock, which has nearly $10 trillion in assets, is widely considered to be the world’s most powerful investor. His annual letters to leaders of the nation’s largest companies are must-reads that change corporate behavior.
This year, BlackRock sided with the upstart firm Engine No. 1 in its proxy fight with Exxon, helping the small, climate-focused hedge fund win two seats on Exxon’s board. That shareholder vote followed through on Fink’s promise last year to hold companies accountable if they didn’t have a credible plan to reduce their carbon emissions.
Now BlackRock is offering to give up a bit of its power. Starting next year, some of its biggest institutional clients will have the ability to cast their own votes at shareholder meetings instead of BlackRock voting for shares on their behalf. The move could shift responsibility for the votes of as much as $2 trillion in shares held in BlackRock accounts, or about 40 percent of its nearly $5 trillion index fund business.
Allowing investors to vote their shares gives BlackRock some cover, especially when it comes to what has become its thorniest issue: its size. In recent years, BlackRock has been simultaneously criticized for having too much power and for not using it to push for more changes at companies in which it invests. “It will allow them to say that they are putting voting power back into the hands of the beneficial asset owners and also deflect some of the criticism that BlackRock has received,” said Douglas Chia, the president of Soundboard Governance.
Supporters of more shareholder engagement welcomed the move. “When the biggest asset managers control a sizable chunk of the voting at the biggest companies, shareholder advocates trying to make change can often end up feeling like one David against two Goliaths,” said Matthew Prescott, a senior director at the Humane Society of the United States. “Whatever BlackRock’s motivation, dividing up even part of that power seems like it’ll be a good thing.”
HERE’S WHAT’S HAPPENING
The Senate passes a short-term increase in the debt ceiling. The legislation to raise the debt limit by $480 billion — which is expected to be enough for the government to continue borrowing through at least Dec. 3 — passed along party lines. The House will take up the bill next week.
The I.M.F.’s board will decide the fate of its leader. The tenure of Kristalina Georgieva, the fund’s managing director, is in limbo over claims that she pressured staff members to manipulate a report to placate China when she was at the World Bank. (She has denied the allegations.) At a meeting today, the I.M.F. board will decide whether it still has confidence in her.
Ireland joins an international tax deal. The low-tax country that’s a popular base for multinationals had been a holdout in a sweeping tax overhaul focused on imposing a global minimum corporate income tax of 15 percent. A deal could be announced today.
Tesla is moving its headquarters to Texas. The electric vehicle maker is the latest big company to move there in recent months. Tesla’s shift makes good on a threat that Elon Musk issued last year, when he was frustrated by lockdown orders at Tesla’s factory in Fremont, Calif.
Investment advisers are increasingly nervous about stocks. Domestic stock funds recorded a small loss in the third quarter and strategists aren’t optimistic about the quarters ahead.“We’re not bullish today at all,” David Giroux of T. Rowe Price told The Times.
What to watch in today’s jobs report
This morning, the government will reveal how many workers employers added in September. August’s number was a disappointment, as rising coronavirus cases forced companies to curtail hiring. Economists expect September to be better.
But even if September is strong, given August’s weakness, the average gain over the past two months is still likely to be lower than in the spring and the summer. Here’s what to look for in the report to understand what’s really going on:
Hospitality workers: Restaurants and hotels are the most vulnerable to fluctuations in Covid cases. If hiring in these sectors falls short of expectations, it may say more about case counts than the overall economy.
Professional services: Hiring in sectors where people can work remotely is a good gauge of demand. In August, the number of new jobs in professional and business services was a relatively high 74,000. A similar or higher number would suggest that the economic recovery is still on track.
Labor force: A lack of workers is causing bottlenecks and inflation. The labor force — the number of people who have jobs or who are actively looking for work — grew by 200,000 in August, which was good but not great. Economists are expecting a dip in September’s unemployment rate. The best outcome would be for this rate to fall because fewer people were jobless and because more people formally joined the labor force.
Average hours worked: If the overall jobs number disappoints but average hours worked rose, it could indicate that economic activity is still strong, just rising faster than companies can hire.
In other labor market news, recruiters are returning to college campuses in a big way.
“We’re now at a turning point in cryptocurrency. The same technology of freedom could become part of a new technological dystopia.”
— Lane Rettig, an entrepreneur and former senior programmer at the Ethereum Foundation, on El Salvador adopting Bitcoin as legal tender last month. The country’s populist president, Nayib Bukele, pitched the policy — which made all vendors legally obligated to accept the cryptocurrency — as a way to promote financial inclusion.
Renren, SoFi and a $300 million settlement
Last night, the U.S.-listed Chinese social media company Renren agreed to pay at least $300 million to minority shareholders who had claimed that company insiders spun off its most valuable assets at less than their fair market value. Among those holdings was a stake in the SoftBank-backed fintech company Social Finance, or SoFi.
Some Renren shareholders sued in 2018, and the litigation involved far-flung participants, disputes over tens of thousands of documents in Mandarin, novel jurisdictional issues and 19th-century Cayman Islands law. The litigation created a new precedent for holding foreign companies accountable in U.S. courts, William Reid, the lawyer for the plaintiffs, told DealBook, which is the first to report the settlement.
The plaintiffs see the settlement as a big win, and not just for themselves. “This is an important message,” said Peter Halesworth, the founder of Heng Ren Investments, a Boston-based, China-focused asset manager. “U.S. shareholders will fight raw deals of bad actors from China in our stock markets.” The defendants admitted no wrongdoing.
U.S. regulators are eying Chinese companies. Last month, the S.E.C. issued a warning to investors in Chinese companies listed in the U.S. after it told Chinese companies hoping to list that they would be subject to additional disclosures. And Chinese companies may soon get delisted if they don’t submit to audit inspections by U.S. regulators.
The questions don’t end with this case. Renren’s founder, Joe Chen, was until recently a SoFi board member. The accusations against him in the now-settled lawsuit were brought to the attention of the S.E.C. by Representative Brad Sherman, Democrat of California, after SoFi merged with a SPAC run by the tech investor Chamath Palihapitiya in June. “Given Mr. Chen’s apparent disregard for the shareholders of one public company that he controlled,” the congressman wrote, “it is concerning that the recent SoFi SPAC merger was able to go forward with Mr. Chen as a member of the SoFi board.”
Renren, SoFi and SoftBank did not respond to requests for comment.
Weekend reading: Give and take
Many companies are promoting their sustainability goals, particularly their plans to reach net-zero carbon emissions. But Paul Polman, the former C.E.O. of Unilever who became a standard-bearer for corporate social responsibility, is unimpressed. In fact, he argues that having “zero” as a goal reveals a fundamental flaw.
Polman’s new book with the sustainable business expert Andrew Winston, “Net Positive: How Courageous Companies Thrive by Giving More Than They Take,” argues that it’s profitable to do business with the goal of making the world better. Polman spoke to DealBook about how to do it. The interview has been edited and condensed.
What’s the problem with net zero?
Net zero is not enough. Many companies plan to reduce their emissions or are relying on future carbon capture technologies to ensure they take back as much as they put out, but balancing carbon isn’t enough anymore because collectively — globally — we’re showing increased emissions despite reduction commitments. That means we are going to have to do more than reach zero.
Can companies make the world better?
We’ve already overshot a lot of nature’s boundaries, so it’s not enough to just try to be less bad. Infinite growth on a finite planet isn’t sustainable. We won’t be able to do business at all if this continues. We’re arguing in the book that companies that take ownership of difficult social and environmental justice issues will do very well in the future.
How would a company start down this path?
You need to think about your purpose. Why are you here? You won’t last long if the world is not better off with you in it, and not attacking issues costs infinitely more in the long term. Now companies have to think about how to drive changes in habits instead of depleting resources and driving more consumption. Producing more stuff doesn’t work.
What does it mean to be “net positive”?
It means not just being “green” or less bad by minimizing harms, and not just operating sustainably, which means having a neutral effect on the planet. Net positive is restorative, reparative and regenerative.
THE SPEED READ
A group led by Saudi Arabia’s sovereign investment fund bought Newcastle United, the English soccer club. (NYT)
The insurance company Chubb will take over its rival Cigna’s business in Turkey and Asia in a $5.75 billion deal. (FT)
Sherrese Clarke Soares of Apollo-backed HarbourView Equity Partners on the high-stakes bidding for music catalogs. (NYT)
The Fed is going to begin assessing big banks’ exposure to potential losses from climate change in its stress tests. (NYT)
A pandemic rescue program for small businesses paid $4.5 billion in grants for “illogical” claims. (NYT)
China fined the food-delivery giant Meituan $530 million for antitrust violations. (NYT)
Stephen Labaton, a former executive at Booz Allen Hamilton and longtime regulatory correspondent at The Times, is the new head of communications at NBCUniversal. (Deadline)
Best of the rest
One reporter’s journey to get to the bottom of the biggest mystery in cryptoland. (Bloomberg)
Marc Benioff may be close to handing off the top job at Salesforce. (The Information)
“The Crown” actress Claire Foy will play Facebook’s Sheryl Sandberg in a new TV series about the social media giant. (Variety)
Rich Handler, the Jefferies chief with “an offbeat online persona,” is Wall Street’s newest billionaire. (Bloomberg)
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