Good morning from Geneva.
If Larry Fink and Elon Musk got into an ideological fight over capitalism, who would win? The answer, it turns out, is shareholder democracy.
“We believe in stockholder democracy—your rights need to be protected,” Tesla wrote on VoteTesla.com last month as it rallied support for its CEO’s enormous compensation. On Thursday, we will know whether that backing of shareholder democracy has paid off when Tesla investors vote to “ratify” or reject Musk’s pay package of $56 billion, which was negotiated and approved back in 2018, but struck down by a Delaware judge earlier this year.
It would be easy to discard Tesla’s—a.k.a. Musk's—sudden embrace of shareholder democracy as opportunistic. But that would miss the bigger point: shareholder democracy is emerging as the middle ground among those favoring shareholder primacy—like Musk—and those backing stakeholder capitalism—like Fink.
For much of the past decade, the two CEOs held opposite views on capitalism.
From 2018 until 2022, Fink crusaded for stakeholder capitalism and the pursuit of environmental, social and corporate governance (ESG). “A stakeholder capitalistic model creates greater profits [than shareholder capitalism] because when a company is better connected in society, society wants to do more with that company,” Fink told me back in 2020.
Musk has always been in the opposite camp. Ever since Tesla got booted from the S&P ESG index in 2022, he has made stakeholder capitalism and ESG his arch-enemies. Last week, he wrote on X that “ESG is a corrupt lie. It needs to end.” In January, Musk promoted a disparaging analysis of stakeholder capitalism by Grok, X’s AI chatbot.
But with Musk’s campaign for shareholder democracy, the pro- and anti-ESG and stakeholder campaigners have now found common ground. Fink had already made his U-turn towards shareholder democracy earlier this year when BlackRock expanded its Voting Choice program, allowing retail investors to vote directly in shareholder meetings, rather than BlackRock doing it for them. “These additional voices"..."can further strengthen shareholder democracy,” Fink wrote at the time.
While they may find themselves to be strange bedfellows, Fink and Musk seem to have buried the ideological hatchet. Out with shareholder primacy. Out with stakeholder capitalism. Long live shareholder democracy, corporate America’s new unifying business paradigm.
In other news, Fortune and Meta are hosting a CMO breakfast bulletin on “Mastering AI” next Tuesday in Cannes, with Fortune’s own AI expert Jeremy Kahn. If you’d like to attend, let us know here.
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Peter Vanham
peter.vanham@fortune.com
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