On Nov. 4, New York City police arrested a group of coal miners peacefully protesting outside the Manhattan headquarters of BlackRock, the biggest financial asset manager in the United States. The demonstrators were there because of a bitter strike by the United Mine Workers of America (UMWA) that began last April against Warrior Met Coal, Inc., which mines non-thermal metallurgical, or “met,” coal in Brookwood, Alabama.
BlackRock holds a roughly 14 percent stake in Warrior Met, making it one of the major shareholders in the company. (Other large asset managers, including Vanguard and Fidelity, also own large blocks of Warrior Met stock). The demonstrating miners targeted BlackRock, along with other large institutional owners of Warrior Met, because its holdings in the company give it the leverage to force management to end the strike, which management has so far shown no signs of wanting to do.
The arrest of the Alabama coal miners outside BlackRock’s headquarters is a parable of contemporary America. Here’s why.
Why Blackrock Matters
Although hardly a household name, BlackRock is among the top five owners in almost every major global company. Thus, it holds one of the top five voting blocs of shares in each of those companies.
BlackRock has shown no hesitation in muscling corporate management in the past. Its CEO and founder Larry Fink issues a letter every year to the CEOs of corporate America, laying down the instructions he expects them to follow.
When Fink speaks, corporate America listens. For example, massive oil producer Exxon is considering dropping several drilling projects after BlackRock forced out Exxon board members and installed new ones in their place. If BlackRock can roll Exxon, it can roll Warrior Met.
Why the Strike?
The main objectives of the strike are to recover some of what the UNMA contends were $1.1 billion in concessions the union made in 2016. At that time, the debt-laden Walter Energy—which owned Warrior Met’s predecessor, Walter Resources—was restructured in corporate bankruptcy.
Walter Energy’s Alabama assets were bought out by an entity called Coal Acquisition LLC, which served as a vehicle for a consortium of private equity firms and hedge funds. The restructuring terminated Walter’s collective bargaining agreement with the miners, and its replacement with Walter’s successor, Warrior Met.
That agreement, which expired last March, required major sacrifices from the miners. They agreed to a $6 an hour pay cut, a $1,500 deductible and co-pays up to $250 (up from a $12 co-pay) for health care insurance, and the elimination of what had been double or triple overtime pay for weekends and holidays.
In the miners’ view, these concessions helped restore Warrior Met to profitability. The UMWA International’s president says his union’s members “are the reason Warrior Met even exists today… They made the sacrifices to bring this company out of the bankruptcy of Walter Energy in 2016.”
$45,000 a Year for Difficult, Dangerous Work
Overtime has become the crucial issue in the current strike, with miners claiming the company forces them to work 12- or even 16-hour shifts that stretch into weekends, and on every holiday except Thanksgiving, Christmas Eve, and Christmas. Warrior Met has countered with an offer of a $1 per hour wage increase, with an additional hike of 50 cents an hour in four years. It refuses to rescind the 2016 $6 per hour cut. Management also demands the right to fire strikers and to award seniority to the strikebreakers (some call them scabs) on whom it is now relying.
The Brookwood miners’ current pay averages $22 an hour. To make that, they may have to work in mining shafts that can go 2,000 feet below the surfac, and travel up to 10 miles to reach the coal face.
Since Warrior Met emerged from Walter’s bankruptcy, it has returned to profitability. Like many other energy suppliers, it had a bad 2020 because of Covid-19. But global demand for coal has soared this year, owing in large part to ostensibly pro-environmental government and corporate policies. Senior Warrior Met executives have reportedly awarded themselves bonuses of up to $35,000 this year.
Warrior Met’s recent third quarter of 2021 saw its most profitable results since the onset of the lockdowns. Its CEO boasted that “[w]e were ideally set to take advantage of the record high pricing we saw this quarter, enabling us to leverage the strong global recovery by increasing our average net selling prices and delivering strong production during the ongoing union strike. . . . [W]e are finding that strong steel and coal demand globally, as well as the Chinese ban on Australian coal imports, are providing tailwinds that play to our strengths.” (China is refusing to buy Australian coal because the Australian government has called for an international investigation into the origins of Covid in Wuhan.)
With Warrior Met now firing on all cylinders—and profiting from China’s boycott of Australian coal—the miners expected a fair share of the gains. But Warrior Met’s managers and owners are saying, “Eat cake.” That leads us back to BlackRock.
Where Does BlackRock fit in?
BlackRock was founded in 1988 by its current CEO, Fink. BlackRock is the world’s largest private asset manager, controlling almost $10 trillion in assets for its clients. BlackRock has only three competitors of comparable, although smaller, scale.
The bulk of BlackRock’s business consists in managing non-public portfolios for institutions. Institutional clients include governments, sovereign wealth funds, foundations, and both private and public pension plans. Although its clients own the shares it manages, BlackRock decides how to cast the proxy votes for most. This gives BlackRock immense power over corporate management. It is not restrained in using that power.
Asset managers like BlackRock follow both “passive” and “active” investment strategies. Most of BlackRock’s holdings were, and still are, “passively” managed, meaning the performance of those funds is designed to match that of stock market indices whose contents are calculated by companies other than BlackRock, such as Standard and Poor.
Passive investment creates a portfolio of stocks weighted by market capitalization rather than by other factors such as social responsibility or environmental practices. In concentrating historically on passive investing, BlackRock was relying on the “efficient market hypothesis,” which affirms that over time the best risk-adjusted returns are obtained from a portfolio that mirrors the stock market at large, rather than one that involves “active” selection of particular shares.
“Passive” investment is, however, a low-fee and competitive environment for BlackRock and other asset managers. In recent years, BlackRock has increasingly promoted “active” (and, for BlackRock, much more lucrative) investment models based on economic, social, and corporate governance (ESG) factors.
Thus, BlackRock pledged to reduce holdings in fossil fuel companies in its actively-managed ESG portfolios, and specifically to screen out companies that generate more than 25 percent of their revenues from thermal coal. As of last January, however, BlackRock held $85 billion in coal company shares in its index-linked portfolios.
The ESG investment style that BlackRock is using to brand itself has had its share of powerful critics. The former head of BlackRock’s ESG investing has denounced it as a “dangerous placebo.” U.K. hedge fund manager Sir Christopher Hohn has said that BlackRock’s climate change credentials are “full of greenwash.” So, to paraphrase the scriptures, BlackRock’s voice sounds like Jacob’s, but its hands may be Esau’s.
BlackRock and the Democratic Party
BlackRock is a major DC “swamp” denizen with has close and substantial ties to the Biden administration and, before that, to Hillary Clinton’s 2016 presidential campaign. The Atlantic reported in January 2019 that in a meeting with candidate Joe Biden, Fink told him, “I’m here to help.” Fink also angled for the position of secretary of the Treasury under would-be-president Hillary Clinton.
BlackRock’s years of help for the Democratic Party have not gone unrewarded, either in policy or personnel. Biden’s Securities and Exchange Commission and Labor Department are attempting to impose BlackRock-promoted ESG mandates on securities markets.
The head of Biden’s National Economic Council is a BlackRock alumnus, and one of Treasury Secretary Janet Yellin’s top advisers had earlier been Fink’s chief of staff. BlackRock has a hold on the Biden administration as tight as investment banker Goldman Sachs had on the Obama administration.
Now, Back to the Arrested Miners
Suppose we were to take BlackRock’s (and Warrior Met’s) professions of social responsibility at their word. Also, let’s suppose that in owning a large piece of Warrior Met, BlackRock is not compromising its alleged environmentalist goals. Why shouldn’t BlackRock lean on Warrior Met’s management to cut a deal with the striking Alabama miners?
At the worst, that might mean a nick to Warrior Met’s bottom line. Even so, Warrior Met is an insignificant part of BlackRock’s massive holdings. Why should that matter to a—serious—socially responsible asset manager? Indeed, why should it matter to Warrior Met, which also claims to be socially responsible, and apparently can hand out large bonuses to its senior executives?
Warrior Met’s offer to the strikers is derisory. It would not restore them to the position they had when Walter Energy went broke five years ago. It would not allow the miners’ wages and benefits to keep pace with the inflation that BlackRock’s powerful allies in Washington DC are causing. Warrior Met might actually have the pricing power to ride out the Biden inflationary storm, or even to benefit from it. But its workers, if they are bulldozed into accepting its terms, would be badly squeezed.
Instead, what do we see? A protracted miner strike that is all but ignored by the corporate-friendly MSM. A coal mining company that vaunts its wokeness but tries to crush a strike by those who work for it. Behind it all, BlackRock, which wants the peace of its Manhattan Park Avenue office undisturbed by the rabble from Alabama who go 2,000 feet underground to mine coal for it 16 hours a day, weekends included.
Republican populists should be all over this strike, even though the establishment Republican Party is happy to trash blue-collar strikers. The Alabama miners are our people and our voters. Fink and his plutocratic crowd are our sworn enemies. They own the Democratic Party. Let them have it: it’s going down to defeat soon enough anyway.
GOP presidential hopefuls should be swarming to Alabama to rally the miners and show support for their cause. (Donald Trump, are you listening?) GOP members of Congress should have BlackRock in their cross-hairs. They should be drafting the legislation that will unfasten its grip on corporate America. And why shouldn’t Tucker Carlson do a segment on the miners’ strike?
If you want a parable for contemporary America, then look no further.