Charlie Munger shared his concerns openly on BlackRock (NYSE:BLK) and the growing power of its CEO, Larry Fink. During a 2022 shareholder meeting for the Daily Journal Corporation (NASDAQ:DJCO), the late vice chairman of Berkshire Hathaway (NYSE:BRK, BRK.B)) warned that passive investing had quietly handed too much control to just a few people.
“Oh, huge,” Munger said when asked if index funds were impacting stock prices. He pointed out that giants like BlackRock, Vanguard and State Street (NYSE:STT) vote on behalf of millions of investors, giving them incredible sway over corporate boards and decisions.
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“We have a new bunch of emperors, and they’re the people who vote the shares in the index funds,” he said. “Maybe we can make Larry Fink and the people at Vanguard Pope,” he added, half-joking.
But Munger made it clear he wasn’t laughing about the risks. “I don’t know what the consequences are going to be, but I predict it will not be good,” he said.
BlackRock manages over $13.46 trillion in assets, making it the largest asset manager in the world. The firm owns large stakes in most major companies and holds immense voting power over shareholder resolutions. While index funds were created to help regular investors access the stock market, they’ve also resulted in fewer people controlling more corporate power.
Fink, in particular, has drawn fire for using that influence to push environmental and social goals. In a 2022 letter to CEOs, he warned companies that BlackRock could vote against management teams that didn’t follow sustainability standards. That kind of pressure has real consequences. In 2021, BlackRock helped activist fund Engine No. 1 replace three board members at Exxon Mobil (NYSE:XOM) despite the fund owning just 0.02% of shares.
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“I think the world of Larry Fink, but I’m not sure I want him to be my emperor,” Munger said.
Since then, BlackRock has backed away from its earlier ESG push. It exited the Net Zero Asset Managers Initiative and scaled back support for environmental proposals. But that shift didn’t stop the criticism.
Even as it tones things down, BlackRock still holds enormous influence over how companies are run, and Munger’s warning hasn’t been forgotten. He believed in capitalism, but he also believed that too much concentrated power could result in trouble. And in the world of trillion-dollar fund managers, that concern still resonates.
