You've probably seen
my favorite cartoon. A man in a battered suit sits next to three children around a campfire. Behind them is a cave wall covered with etchings of an apocalyptic landscape. "Yes, the planet got destroyed," the man says. "But for a beautiful moment in time we created a lot of value for shareholders."
It epitomizes an era in which corporate executives believe they have one duty above all others: to maximize shareholder value. It's an ethos that's driven the stock market to unseen heights, creating massive wealth for investors, pensioners and CEOs alike. It's an ethos that's helped contribute to a widening wealth disparity, the potential for climate catastrophe, and a whole generation of young people who are entirely unconvinced that capitalism is a good thing.
Two years ago, one of the most powerful men in finance wrote a letter arguing it was an ethos that had to be defeated. This week, one of the most valuable venture-backed companies in the world took up the torch. The multibillion-dollar question: Will it make any difference?
It's letter-writing season in corporate America, which is one of 12 things you need to know from the past week:
From the desk of Larry Fink (Sean Gladwell/Moment/Getty Images) 1. Corporate conscience Every January, BlackRock chief executive Laurence Fink sends a note to his company's many, many clients. BlackRock manages about $7 trillion in assets, so when he speaks (or writes, I suppose), people tend to listen (or read).
2018 missive argued that corporations had become "too focused on quarterly results," making the case that the dollar shouldn't be quite so almighty. "To prosper over time," Fink writes, "every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
Some thought a new day had dawned. The New York Times
wrote that the note was "likely to cause a firestorm in the corner offices of companies everywhere and a debate over social responsibility that stretches from Wall Street to Washington." And sure, it made a few headlines and sparked a few conversations. Perhaps it inspired some new charitable donations and corporate governance practices. But there was nothing at all resembling a widespread change in the wake of Fink's call to action.
This week brought a sign that Fink's ideas could be spreading. On Friday morning, Airbnb—the vacation rental company that was valued at more than $30 billion with its latest round of venture capital—published
a note outlining a new set of corporate priorities. Instead of just shareholder value, Airbnb wants to maximize the good it does to all stakeholders in the company, which it identifies as the people who use its platform, its employees, the communities where it operates, and yes, its investors.
It's a call back to the mid-century idea that there was more to running a public company than earning as much money for oneself as humanly possible. With announced plans to go public this year, it's perhaps also an effort by Airbnb to get ahead of the sorts of corporate governance issues that so plagued WeWork during the fall of 2019.
And intentional or not, the language of the letter has clear echoes of Fink: "We believe that building an enduringly successful business goes hand-in-hand with making a positive contribution to society."
This isn't the first time Airbnb has indicated an interest in moving governance practices away from the shareholder-centric model that's dominated Wall Street since the go-go 1980s. Back in 2018, CEO Brian Chesky authored
a similar note emphasizing the company's desire to benefit all stakeholders. Later that year, reports emerged that Airbnb was exploring ways it could offer equity to its hosts, a concept that could reshape the way various gig-economy companies compensate their workers—sorry, "contractors."
The ideas are good ones, in my opinion. A near-sociopathic focus on stock price and quarterly numbers seems unhealthy both for society at large and for the long-term health of companies themselves. But theory is one thing. How much of an impact will BlackRock and Airbnb's letters make?
In terms of forcing changes at the companies it invests in, BlackRock's reliance on passive funds paints the firm into something of a corner. Fink's 2018 note admits as much: "In managing our index funds," he writes, "BlackRock cannot express its disapproval by selling the company's securities as long as that company remains in the relevant index." This was not an order to portfolio companies who must follow Fink's wishes or see their investment dry up; it was more of a suggestion.
Airbnb has more power over its own operations, but the changes the company announced are far from wholesale. Airbnb will now consider metrics like guest safety when doling out employee bonuses. It will host a stakeholder day to report on its progress. It announced plans for a stakeholder committee led by current COO Belinda Johnson that will offer its opinions to the Airbnb board about the ongoing effectiveness of this "multi-stakeholder approach."
In short, it's not like Airbnb is going to become a user-owned co-op, or that it's going to start donating 10% of its profits to a charity that would help those affected by the Bay Area housing crisis (although the company has
pledged cash to the problem before). I suppose a committee could in some way be construed as "a positive contribution to society," but there's a bit of a difference in scope between Airbnb's words and its actions.
I should probably mention at this point that Fink published the latest letter of his own this week, setting his sights on a new problem:
our warming world. "The evidence on climate risk is compelling investors to reassess core assumptions about modern finance," he writes, pledging that environmental sustainability will be a key consideration in BlackRock's investments going forward.
In the letter, it appears to be more of a financial issue for Fink than a moral one. The concerns he lists aren't about wildfires decimating ecological diversity or rising sea levels turning hundreds of millions of people into climate refugees; they're about the future of the 30-year mortgage and the market for flood insurance. When Fink envisions a future in which "the cost of food climbs from drought and flooding," his main concern in the letter isn't with starving people; instead, he asks, "What happens to inflation, and in turn interest rates"?
This, I think, gets at the core of this whole discussion about investors and companies pledging to look beyond maximizing shareholder value. Really, it's just changing the definition. Instead of emphasizing profits on a three-month time frame, they're doing so in the very long term. As Chesky wrote back in his 2018 note on Airbnb's future: "We will have an infinite time horizon."
BlackRock and Airbnb are emphasizing social responsibility and climate change in their public communications because they think doing so is the best way to maximize their own worth in the future, not because they want to save the world. And really, that shouldn't come as a surprise. 2. Plaid gets paid Visa shook up the fintech world this week with an agreement
to pay $5.3 billion for Plaid, a San Francisco-based startup whose services help users connect their bank accounts to apps like Acorns and Venmo. The deal comes a little more than a year after Plaid last raised VC, a $250 million round at a $2.65 billion valuation. The sale to Visa marks a major exit for some of the biggest names in VC, including Andreessen Horowitz, NEA, Norwest Venture Partners and Spark Capital. 3. Founder drama Barely a month after stepping down amid intense criticism of her management style sparked by an investigation from The Verge, co-founder Steph Korey is back in the C-suite at Away, a trendy luggage startup valued at $1.45 billion. This time, instead of being the company's sole chief executive, she'll be co-CEO alongside Stuart Haselden, the man brought in to replace her. For the co-founders of Juul, meanwhile, the hits keep coming: Reports emerged this week that a minority shareholder is suing Adam Bowen and James Monsees over $1 billion in total stock sales that allegedly amounted to self-dealing. 4. Automakers investing Companies that dominated the automotive industry during the 20th century continue to put hundreds of millions of dollars to work in hopes of ensuring their position in the decades to come. This week, Toyota put $394 million into a round totaling $590 million for Joby Aviation, which is building electric flying taxis. And a day later, a UK-based startup called Arrival announced €100 million (about $111 million) in new funding
from Hyundai and Kia to help continue developing its electric delivery vans. 5. KKR's activist bent Hedge funds like Elliott Management and Two Sigma are raising private equity funds. So why shouldn't KKR behave a bit more like a hedge fund? On Friday, the firm disclosed a 10.7% stake in Dave & Buster's and also indicated that it could attempt to influence dealmaking and management decisions at the restaurant and arcade operator—the sorts of activist actions that private equity firms have normally eschewed. There's reason to believe PE's attitudes toward the public market could be changing, including new public equities funds said to be in the works at Bain Capital and TPG.
One activist push I could get behind: more Skee-Ball. (Image Source/DigitalVision/Getty Images) 6. Big tech takeovers The same week that parent company Alphabet saw its market cap top $1 trillion for the first time, Google struck deals to acquire Pointy (which makes online shopping and advertising software) and AppSheet (the creator of an app-development platform). Not to be outdone, Apple—whose market cap now sits at about $1.4 trillion—announced on Wednesday the purchase
of AI startup Xnor.ai, paying about $200 million to the company's prior VC backers. 7. Startup shakeups Eaze was one of the first marijuana startups to enter the public eye, raising well over $100 million in VC to power its delivery services. But the company may now be in trouble, according to a TechCrunch report, with layoffs in the works and cash reserves dwindling. The week also brought a change of direction for Atrium, a company formed by Twitch co-founder Justin Kan to provide lawyers and legal services to startups. Now, with an eye toward "sustainability"—i.e. profits—Atrium is reportedly laying off most of its lawyers and focusing solely on legal software. 8. Defense developments Israel's Cellebrite this week agreed to acquire BlackBag Technologies, a creator of forensic software used by law enforcement to track down digital crimes, in a deal that marks an exit for In-Q-Tel—the venture arm of the Central Intelligence Agency. Elsewhere, Lux Capital brought on Tony Thomas as a venture partner, adding to its operations a retired four-star Army general who once commanded all US and NATO special forces in Afghanistan. 9. Plant-based everything Califia Foods raised $225 million this week from a roster of global investors to fund its plant-based offerings, including dairy alternatives like almond milk, oat milk and dairy-free yogurt. Another plant-based dairy company, Perfect Day, closed a $140 million round last month. Also this week, Beyond Meat continued its rollercoaster life on the stock market, with its share price shooting up more than 25% in one 24-hour span after prior reports that rival Impossible Foods had pulled out of talks to supply its products to McDonald's. 10. Fun with numbers Obvious Ventures was one of the investors following Beyond Meat's ups and downs. The firm also closed its third fund this week, hitting an unusually precise sum: $271,828,182. If you spend much time calculating compound interest (or teaching high-school math), you might recognize those numbers as the first nine digits of e, also known as Euler's number, a mathematical constant that's quite useful in calculus. 11. Busy, busy Blackstone Blackstone's biggest development of the past seven days was probably an agreement to purchase a major stake in the real estate of the MGM Grand and Mandalay Bay hotels, reportedly valuing the combined properties at $4.6 billion. But as always, the firm stayed busy on several fronts, leading an $850 million recapitalization of solar power provider Altus Power, agreeing to acquire a warehouse business in India and registering nearly $4 billion in commitments for a new energy fund with the SEC. 12. Flattery The ostensible point of
this Bloomberg story was that a Chinese ridehailing startup called Dida Chuxing is trying to raise $300 million. I, however, could not get past the fact that there is a Chinese ridehailing startup called Dida Chuxing—not to be confused with industry giant Didi Chuxing, of course. Actually, what am I saying: It seems like the entire point of naming your company Dida Chuxing is hoping that people will mistake it for Didi Chuxing.