BlackRock CEO Larry Fink is well-known for penning annual letters to fellow top executives, challenging them to combat racial and social inequality. When protests over the murder of George Floyd by a Minneapolis police officer roiled the country in May 2020, Fink wrote that the incident shows “how much work we have to do to build a stronger, more equal, and safer society.”

At the same time, BlackRock is the largest investor in U.S. private prison firm CoreCivic, with a stake of 15.38%. If mass incarceration in general doesn’t sound particularly in line with racial justice  — Black Americans are more than five times as likely to be incarcerated as white Americans  — profiting from private prisons is worse. CoreCivic and rival GEO Group have faced numerous lawsuits and other accusations of housing people in unsafe conditions, providing abysmal healthcare and food, keeping inmates as long as they can to maximize revenue, and paying staff as little as possible to limit expenses. 

“It’s Hell,” a Black prisoner who goes by “Abe” told us, describing his experiences at CoreCivic’s Trousdale Turner Correctional Center in Hartsville, Tennessee. Abe, who has also been incarcerated in publicly-managed facilities, said conditions at Trousdale are particularly bad because of understaffing and poorly-trained guards.

People are getting beat up, stabbed,” he says. “It’s out of control. Totally out of control.”

From January 2020 to March 2021, there were three homicides reported at Trousdale, more than any other prison in the state, reported the Tennesean. One of them was 37-year-old Terry Childress, who was sleeping when his cellmate allegedly pulled him out of bed and stomped him to death. The guards were MIA during the attack, his brother, Jeremy Childress, says. “They don't care what's going on. Top people are getting paid. There’s so much turnaround and they don't care.”

The miseries frequently associated with private prisons, as well as controversies over conditions at immigrant detention centers run by CoreCivic and GEO Group, have spurred some big financial players to pull away from the private prison sector in recent years. Banks such as Wells Fargo, JPMorgan and Bank of America have all pledged to cut back on relationships with the companies. President Joe Biden has also issued an order to phase out the federal government’s use of private prisons, although that does not stop the companies from continuing to operate many state facilities.

Major asset managers, however, have held on. Along with BlackRock, those include Vanguard, State Street and Fidelity. Under the leadership of president and CEO Abigail Johnson, Fidelity has actually increased its stake in CoreCivic from about 1.5 percent in February 2020 to more than 10 percent in June, according to regulatory filings.

All of these companies have trumpeted social justice values over the past year. Vanguard for instance told its customers, “We stand united with the Black community and lend our voice to the call for meaningful and systemic change.” The asset manager currently holds about a 10 percent stake in CoreCivic and a 17 percent stake in GEO Group.

Johnson, an heiress and the seventh wealthiest woman in the world, has also been the subject of glowing “girl boss” type profiles about her stewardship of the investment firm, support for the Black Lives Matter movement and concern for issues such as homelessness. Her appetite for private prison stock is rarely discussed.

Given the image liabilities it might seem odd that investment firms would be so wedded to their private prison holdings, especially when they are trying to position themselves as champions of social causes and racial equality. Stock prices for the firms have also been frequently subject to downward pressure as public opinion of the companies sinks.

A spokesperson for Vanguard, the world's largest retail mutual fund company, said it is a long-term investor in "many companies," and that its investment choices are consistent with its performance mandates. 

"We represent investors who have chosen to predominantly invest in broad-based index funds" which are "designed to provide low-cost, broadly diversified exposure to a market or market segment and closely track the risk and return characteristics of a clearly defined, target benchmark," the spokesperson said. "With this in mind, Vanguard operates a robust investment stewardship program to identify material risks and issues across our portfolio, including those related to human rights, equality, injustice and diversity." 

Vanguard has "engaged with companies in the private prison industry" to voice concerns about human rights issues, the spokesperson said. The firm's 2021 stewardship report describes conversations Vanguard had with CoreCivic and GEO Group management  in which the asset manager "sought disclosure of the companies' efforts to improve sanitation and health care conditions across their facilities" and "encouraged the companies to measure and disclose the success of their rehabilitation programs and the impact of those programs on their inmates' recidivism rates." 

The asset manager further noted that it plans "to continue engagement with the companies' boards about their growing regulatory and reputation risk in the 2021 market environment." 

State Street, Fidelity and BlackRock did not respond to requests for comment.

Bianca Tylek, executive director of Worth Rises, which lobbies companies to divest from incarceration-related industries to end prison profiteering, explained to us that there are a number of reasons why investment firms might remain addicted to the stocks, despite significant downsides. 

Contracts for the facilities are usually long-term, providing a steady flow of revenue, according to The prison firms also have a lot of control over how much resources they spend, as well as how long they keep inmates incarcerated. Staff can find reasons to take away good behavior credits or other early-release incentives for prisoners for various reasons, allowing them to keep beds filled. That combination of factors makes them popular with money managers, according to Forbes.

“They have a vested interest in keeping people incarcerated,” Tylek says. 

On average, staff at public facilities make $6,000 more than employees at private prisons, according to the Pulitzer center.

“The jobs are less attractive, you attract lower quality talent. They don’t train them well, and high rates of turnover make the issue worse,” says Tylek. The end result is bad for prisoners and bad for staff, with more frequent violence, higher uses of force, and more lockdowns forcing prisoners to remain in their cells for extended periods of time, and more use of solitary confinement. Without adequate staff, inmates in such conditions may go days or weeks without access to phones, sunlight or showers.

A former guard for the Trousdale facility, who chose to remain anonymous, explained to the Business of Business that there may be as few as 20 people on duty during the weekends for a complex of over 2,600 inmates. That makes it difficult, if not impossible, to stay on top of safety concerns and emergencies, the former guard said.

“Last year, day staff came in one morning to find a dead body on the infirmary floor,” the former guard said. “Night staff had been busy.”

The guard also spoke of a poorly-trained colleague, assigned to a medical ward, who didn’t believe schizophrenia (one of many mental disorders that disproportionately afflicts the incarcerated) was real, but rather a made-up condition used by prisoners to get attention.

In an especially dark twist, some money managers might be interested in holding private prison stocks out of hope for a boost from a short-squeeze, like the type that caused Gamestop’s stock to skyrocket early in 2021. Day-traders congregating on Reddit have looked for heavily shorted stocks to pile into, forcing some investors to buy back stock for higher prices and causing share values to rapidly soar.

“When the price increases, short sellers are forced to close their positions, which requires that they buy the stock – creating a positive feedback loop,” Tylek said.

Then there are those who simply view private prisons as a sound investment, bound to bounce back in the long run, despite negative headwinds associated with the facilities.

"There are certainly a few people that think private prisons aren’t going to go away that are still invested," she said.

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