![]() In addition, he encourages firms to detail, in their disclosures, any strategic actions taken or planned in response to the evolving environmental and regulatory landscape. In the letters, BlackRock CEO Larry Fink explicitly urges portfolio firms to acknowledge and quantify the impact of environmental and social risks and opportunities through public disclosure. More recently, the letters have expanded to include recommendations pertaining to environmental and social issues, such as climate change and workforce disparities. Beginning in 2012, the letters initially focused on the importance of corporate governance and long-term firm value creation. We investigate this question in the context of BlackRock’s annual Dear CEO letter, which is addressed to the CEOs of BlackRock’s portfolio firms and published on BlackRock’s website. Footnote 1 However, we lack evidence of whether broad-based public engagement is effective at influencing firm behavior. ![]() Specifically, large institutions with substantial influence may leverage their platforms to push portfolio firms toward favored strategies, and firms may benefit from responding if they can avoid disciplinary actions (e.g., adverse voting and exit). As an alternative, legal scholars point to broad-based public engagement as a mechanism for seeking reforms across many firms, which can complement or substitute for more costly private interactions (Fisch et al. However, for large institutional owners with diverse holdings, relying solely on firm-specific engagements to influence portfolio firms can be cost prohibitive. 2016) or targeted public actions such as activist campaigns (e.g., Brav et al. Historically, institutional owners have communicated recommendations to specific firms through private engagement (McCahery et al. Institutional owners have strong incentives to monitor and engage with portfolio firms to strengthen firms’ performance and corporate governance (Appel et al. Taken together, our evidence suggests that portfolio firms are responsive to BlackRock’s public engagement efforts. Finally, motivated by BlackRock’s attempts to mobilize firms toward its specific policy recommendations, we also provide some evidence that firms’ lobbying efforts during the post-letter period become more aligned with the issues highlighted in the letter, especially when firms’ share BlackRock’s policy preferences ex ante. Moreover, BlackRock appears to value these additional disclosures, as it more often votes with management on shareholder proposals during subsequent annual shareholder meetings. We find that portfolio firms’ disclosures during the post-letter period reflect topics similar to those discussed in the letters, controlling for a variety of firm and disclosure characteristics and the occurrence of private engagements. 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 examine whether broad-based public engagement by institutional investors influences the behavior of portfolio firms. ![]()
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