A New Take on Voice: The Influence of BlackRock’s 'Dear CEO' Letters
67 Pages Posted: 18 Feb 2021
Date Written: January 2021
We examine whether broad-based public engagement by institutional investors influences the behavior of portfolio firms. We investigate this question in the context of BlackRock’s annual “Dear CEO” letter, which in recent years has called for portfolio firms to acknowledge and quantify the impact of environmental and regulatory factors on their firms. We find that portfolio firms’ disclosures reflect topics similar to those discussed in the letters during the post-letter period, controlling for a variety of firm and disclosure characteristics, and the occurrence of private engagements. Moreover, BlackRock appears to value these additional disclosures, as it more often votes with management on shareholder proposals during subsequent annual shareholder meetings. Finally, motivated by BlackRock’s attempts to mobilize firms toward its specific policy recommendations, we also provide some evidence that firms’ lobbying efforts become more aligned with the issues highlighted in the letter during the post-letter period, especially when firms’ share BlackRock’s policy preferences ex ante. Taken together, our evidence suggests that portfolio firms are responsive to BlackRock’s public engagement efforts.
Keywords: Institutional Ownership, Shareholder Engagement, Shareholder Voice, Disclosure, ESG, Lobbying
JEL Classification: G32, G34, M41
Suggested Citation: Suggested Citation