Charlie Manger does not think Larry Fink, founder, chairman and CEO of BlackRock Investment House, should run the world.
Manger, a billionaire, Berkshire-Hathaway vice president and Warren Buffett’s business partner, says the rise in index funds, like those run by Fink, has led to a “huge transfer” of influence on corporate decision-making. It will change the world, “he said, not for the better.
“We have a new bunch of emperors, and they are the people who vote for the stocks in the index funds,” Manger, 98, said at the annual meeting of the Daily Journal, a publishing company he has headed since the 1970s. “I think well of Larry Fink, but I’m not sure I want him to be my emperor.”
BlackRock and Vanguard are the two largest investment management companies that manage passive mutual funds, which track indices instead of trying to beat the market by selecting specific stocks.
Funds have become the default for investments for small investors and large pension funds alike, yielding better returns than many active funds over the course of the market’s rises in the last decade. The change has increased the share of passive index funds in the overall ownership base – and at the same time in the voting power – in many public companies.
The soaring popularity of index funds has made their executives the largest investors in most major stocks. Companies, including BlackRock, have sought to exercise this power in ways that have sometimes caused corporate executives inconvenience. Investment managers held greater control over the company’s important decisions, including those related to changes in leadership, the fate of managers and long-term plans.
Fink is a supporter of ‘stakeholder capitalism’ – the idea that companies have social obligations that extend beyond maximizing value for shareholders. “Capitalism has the power to shape society and be a major motivator for change,” Fink wrote in an annual letter to shareholders last month.
Fink said Blackrock is committed to a future where all investors will have the opportunity to vote on their shares. Last October, the company began allowing certain institutional investors to vote on matters related to their holdings.
BlackRock reported assets it manages worth more than $ 10 trillion in the fourth quarter of 2021, a record-breaking number. Passive funds manage more than two-thirds of these assets.