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Lipton, Peltz Call BlackRock’s Letter a Blueprint for Shareholder Engagement

Martin Lipton of Wachtell, Lipton, Rosen & Katz says his firm sent a memo to clients that called the missive a roadmap for engaging investors.

  • By Alicia McElhaney

Wall Street giants Martin Lipton and Nelson Peltz have thrown their support behind BlackRock Chief Executive Officer Larry Fink’s recent letter to CEOs, calling it a helpful guide for shareholder engagement.

Lipton, a founding partner of law firm Wachtell, Lipton, Rosen & Katz, and Peltz, CEO of alternative investment firm Trian Partners, praised the missive at an event Friday that was co-hosted by the Securities and Exchange Commission and New York University’s Salomon Center for the Study of Financial Institutions.

Fink’s letter, posted January 16 on BlackRock’s website, warned that the world’s largest asset manager could end its support for companies that fail to make positive contributions to society. He called for a new model of shareholder engagement, working throughout the year with companies in which the firm is a stakeholder, as opposed to relying on proxy votes and annual meetings.

“We sent out a memo the same day that Larry’s letter was made public telling our clients that it was a roadmap for how they should view their relationship with investors and how they should engage with investors,” Lipton, who advises major companies on mergers and acquisitions, said at the event. “It actually lays out the same kind of program that we would lay out for a client who has asked us to advise them as to how to deal with their investors.”

[II Deep Dive: Larry Fink to CEOs: Contribute to Society or Lose BlackRock’s Investment]

According to Peltz, strong communication with shareholders, and concern for environmental, social and governance standards, are characteristics of quality companies.

“The really good companies, who are not worried about activists, they’re doing a very good job on ESG and on worrying about stakeholders,” Peltz said. “It’s typically the underperforming companies financially who don’t do the rest of the job.”

Peltz, an activist investor, says some companies struggle with shareholders’ focus on quarterly earnings, rather than long-term results, but Trian thinks they should be able to handle both.

“We believe that managers and boards need to wear bifocals,” he said. “You have to keep a realistic eye on the next quarter, but you have to keep your eye on the long-term target.”

Responsible board members can help keep companies from worrying too much about short-term results or threats from activist investors who aim to take advantage of their businesses rather than aid them, according to Peltz. He said he liked Fink’s focus on companies finding a purpose, which would help guide them when they’re a target of an activist’s campaign.

“That’s what a lot of these CEOs are fighting,” Peltz said of the pressure felt from activist investors. “That’s where we on a board can give them cover.”

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