A New Take on Voice: The Influence of BlackRock’s “Dear CEO” Letters

TL;DR

BlackRock's Dear CEO letters have a significant impact on firms' public disclosures and lobbying behavior.

Transcript

thank you john and thank you to the organizers of the conference as well as stanford and we also want to thank our editor richard sloan and our two anonymous reviewers um for the opportunity to present this paper a new take on voice the influence of blackrock's dear ceo letters and this is co-authored work with nikki skinner and laura wellman now i... Read More

Key Insights

• 😑 Engagement is an important tool for investors to express their preferences to portfolio firms.
• 💦 Prior work on engagement has focused on targeted engagement, but broad-based public engagement proposed by legal scholars can be a potentially efficient mechanism for diversified investors.
• 💌 BlackRock's Dear CEO letters have garnered media attention and firms respond by altering their public disclosures.

Questions & Answers

Q: How do firms respond to BlackRock's Dear CEO letters?

Firms respond by changing their public disclosures, making them more similar to the content of the letters. This is especially true for firms with a higher level of BlackRock ownership.

Q: Do firms also change their lobbying behavior in response to the letters?

Yes, firms aligned with BlackRock's preferences, particularly those supporting Democrats, change their lobbying behavior to align with the issues discussed in the letters.

Q: What is the significance of the changes in disclosure similarity?

The changes in disclosure similarity indicate that firms are providing valuable information and potentially communicating changes in strategy or responding to BlackRock's requests. It is unlikely that firms are providing useless disclosure or expressing opposition to BlackRock.

Q: How does BlackRock value the changes in firms' disclosures?

BlackRock values the changes in firms' disclosures as they associate with the votes at subsequent annual meetings. Firms with greater increases in disclosure similarity are less likely to receive a vote against management from BlackRock.

Summary & Key Takeaways

• BlackRock's Dear CEO letters, addressed to the CEOs of all portfolio firms, emphasize the importance of long-term focus, technology's impact on labor, and addressing ESG issues.

• Firms respond to these letters by altering their public disclosures, making their disclosures more similar to the content of the BlackRock letters.

• Firms aligned with BlackRock's preferences, especially those supporting Democrats, also change their lobbying behavior to align with the issues discussed in the letters.