You don't have to listen to ALL of your shareholders - just the right ones

BlackRock CEO Larry Fink is out with a letter to some of the world's biggest business leaders on Tuesday, arguing that short-term thinking is getting in the way of long-term business growth.

Fink makes a number of points about the current business and regulatory environment, which he argues makes it harder for companies to develop and execute a long-term business plans.

But the most important point Fink makes is that while the leaders of publicly-traded companies have a fiduciary duty to their shareholders, this duty doesn't require that they accede to the demands of every large shareholder: just the right ones.

Here's Fink:

It is critical, however, to understand that corporate leaders' duty of care and loyalty is not to every investor or trader who owns their companies' shares at any moment in time, but to the company and its long-term owners. Successfully fulfilling that duty requires that corporate leaders engage with a company's long-term providers of capital; that they resist the pressure of short-term shareholders to extract value from the company if it would compromise value creation for long-term owners; and, most importantly, that they clearly and effectively articulate their strategy for sustainable long-term growth.

Fink is writing in part in response to the proliferation of activist investors, who have purchased large stakes in companies and then agitated for change. Prominent examples of these investors include hedge fund managers Carl Icahn, Bill Ackman, and Nelson Peltz, who have sought change at companies including Apple, Target, JC Penney, Pepsi, and Du Pont, among others.

Some of these plays have been successful and a win for shareholders, others haven't worked out as well. But the point Fink advances is not that activist investors are bad; just that some of them are.

The growing popularity of activist investors has garnered considerable media attention from outlets like Business Insider as well as many others. And in a recent talk to students at the Ivey Business School in February, legendary investor Warren Buffett said that the trend in activist investing hasn't peaked yet because people are still making money doing it.

Buffett even quipped that if he were starting out in money management today, he'd call himself an activist investor.

Andrew Ross Sorkin at the New York Times, who on Monday night first reported that Fink's letter would be sent around Tuesday morning, noted in his piece that to some extent Fink is talking BlackRock's book. BlackRock is enormous (it has $4 trillion in assets under management), and their size basically requires that they hold investments for an extended period of time.

And so with this style and size, of course BlackRock is going to want to encourage long-term thinking among the world's major business leaders. Depending on your view, this may or may not water-down Fink's broader message, which is that leaders must make the best decisions for their business, and trust that these strategies will be long-term wins for shareholders.