Earlier this month, BlackRock CEO Larry Fink wrote a letter to the heads of every S&P 500 company that some people took as a dig at shareholder activists.
Fink cautioned against dividend payments and stock buybacks — an increasingly hot topic on Wall Street — and asked the executives to consider what’s best for investors in the long run, rather than satisfying the short-term demands of investors like shareholder activists.
So how are the activists taking it? It turns out one well-known activist happened to bump into Fink outside a restaurant that same day.
Barry Rosenstein, a managing partner and co-portfolio manager at Jana Partners, described how that interaction went down on this week’s episode of Wall Street Week:
“We started talking about it and the first thing [Fink] said to me was, ‘You know, everybody interprets this as my being anti-activist — I’m not.’ And I don’t think he was,” said Rosenstein.
“I think he’s just saying the companies shouldn’t knee-jerk, just return capital. They ought to determine what the best return on invested capital is.”
And, for the record, Fink never did say he’s against activism in general. Here’s an excerpt from the infamous letter:
There is nothing inherently wrong with returning capital to shareholders in a measured fashion, as part of a broader growth strategy — indeed, it can be a vital part of a responsible capital strategy. Nor are the demands of activists necessarily at odds with the interests of other shareholders; some activist investors take a longterm view and have pushed companies and their boards to make productive changes.
It is critical, however, to understand that corporate leaders’ duty of care and loyalty is not to every investor or trader who owns their companies’ shares at any moment in time, but to the company and its long-term owners.
BlackRock, unlike activist shareholders, tends to hold invesments for years. Fink is worried about buybacks replacing investments in “innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.”
But Rosenstein didn’t seem too fussed by the letter.
“We find BlackRock to be a very responsible shareholder and they weigh every activist campaign individually and make a decision whether it makes sense or not,” he said.
So it looks like everybody’s still getting along.