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BlackRock CEO Fink: Companies must “serve a social purpose”

The BlackRock CEO wrote that companies should take more social responsibility to solve long-term problems caused by automation and wage stagnation.
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In his annual letter released to CEOs, BlackRock founder and CEO Larry Fink stated that companies must work toward a goal of social responsibility or accept the risk of an increasingly polarized and economically-insecure society turning against them.

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” wrote Fink.

Fink, who oversees the world’s largest investment firm, said that BlackRock would take a more active role in encouraging companies to create long-term strategies to contend with the negative impact of rapid technological progress and other pressing issues.

BlackRock CEO Larry Fink. Photo –
Copyleft/Creative Commons

“Your company’s strategy must articulate a path to achieve financial performance. To sustain that performance, however, you must also understand the societal impact of your business as well as the ways that broad, structural trends — from slow wage growth to rising automation to climate change — affect your potential for growth,” Fink wrote.

Through doubling the size of its investment stewardship wing, Fink said that BlackRock will facilitate “deeper, more frequent and more productive conversations” about how corporate leadership can influence meaningful change in boardrooms and shareholder meetings.

Fink used the recently-passed U.S. tax cut plan as an example of how companies could do more to explain how they will spend their tax savings for the greater good. While economists say the highest-earners will benefit most from the tax cut, there are multiple warnings of how it will increase the national debt by $1 trillion and threaten federal funding of social safety net programs. Fink asked how they will reconcile their short-term profits with long-term goals.

“Tax changes will embolden those activists with a short-term focus to demand answers on the use of increased cash flows, and companies who have not already developed and explained their plans will find it difficult to defend against these campaigns,” Fink wrote.

Fink also criticized the “many governments” which are failing in their duty to adequately prepare for the future. Fink wrote that “society is turning to the private sector” for solutions for worker retraining programs, retirement security, and infrastructure spending.

BlackRock, which manages $6.3 trillion in assets, has the heavyweight power to influence CEOs to think beyond profit gains for shareholders and consider how their companies can affect positive change. Whether Fink’s letter will have a lasting impact or not was debated in the ensuing news cycle after news of the letter’s release broke.

Jeffrey Sonnenfeld, senior associate dean at Yale School of Management, told The New York Times that Fink’s letter is unprecedented and that it “is huge for an institutional investor to take this position across its portfolio.” He said that the letter is a “lightning rod” and will influence other asset managers to act accordingly.

BlackRock’s portfolio is stocked with the top performing companies which contribute to its continued success. In an op-ed for Money Stuff and Bloomberg, columnist and former Goldman Sachs investment banker Matt Levine wrote that it was unclear which public companies would suffer consequences from this increased scrutiny.

At WorkingNation, we highlight the companies, educators, and experts making a difference today to overcome the threat of automation to the American workforce. We promote C-Suite solutions and the public-private partnerships which ensure workers have the adaptable skills to compete in today’s job market.

Fink’s call to action joins the groundswell of awareness of the social problems that affect our collective future. More importantly, it signals that this message is getting through to the top echelons of society.

Join the Conversation: Read Fink’s letter and share your reaction on our Facebook page.

Dana Beth Ardi

Executive Committee

Dana Beth Ardi, PhD, Executive Committee, is a thought leader and expert in the fields of executive search, talent management, organizational design, assessment, leadership and coaching. As an innovator in the human capital movement, Ardi creates enhanced value in companies by matching the most sought after talent with the best opportunities. Ardi coaches boards and investors on the art and science of building high caliber management teams. She provides them with the necessary skills to seek out and attract top-level management, to design the ideal organizational architectures and to deploy people against strategy. Ardi unearths the way a business works and the most effective way for people to work in them.

Ardi is an experienced business executive and senior consultant who leverages business organizational transformation through talent strategies. She uses her knowledge and experience to develop talent strategies to enhance revenue and profit contributions. She has a deep expertise in change management and organizational effectiveness and has designed and built high performance cultures. Ardi has significant experience in mergers, acquisitions, divestitures, IPO’s and turnarounds.

Ardi is an expert on the multi-generational workforce. She understands the four intersecting generations of workers coming together in contemporary companies, each with their own mindsets, leadership and communications styles, values and motivations. Ardi is sought after to assist companies manage and thrive by bringing the generations together. Her book, Fall of the Alphas: How Beta Leaders Win Through Connection, Collaboration and Influence, will be published by St. Martin’s Press. The book reflects Ardi’s deep expertise in understanding organizations and our changing society. It focuses on building a winning culture, how companies must grow and evolve, and how talent influences and shapes communities of work. This is what she has coined “Corporate Anthropology.” It is a playbook on how modern companies must meet challenges – culturally, globally, digitally, across genders and generations.

Ardi is currently the Managing Director and Founder of Corporate Anthropology Advisors, LLC, a consulting company that provides human capital advisory and innovative solutions to companies building value through people. Corporate Anthropology works with organizations, their cultures, the way they grow and develop, and the people who are responsible for forming their communities of work.

Prior to her position at Corporate Anthropology Advisors, Ardi served as a Partner/Managing Director at the private equity firms CCMP Capital and JPMorgan Partners. She was a partner at Flatiron Partners, a venture capital firm working with early state companies where she pioneered the human capital role within an investment portfolio.

Ardi holds a BS from the State University of New York at Buffalo as well as a Masters degree and PhD from Boston College. She started her career as professor at the Graduate Center at Fordham University in New York.