In a powerful example of the thinking around which the Satell Institute was founded and operates, Laurence D. Fink, founder and chief executive of the investment firm BlackRock, informed business leaders that their companies need to contribute to society if they want to receive the support of BlackRock. Mr. Fink has changed the conversation, mandating CSR and making it a requirement for investors. Below is an excerpt of the article, written by Andrew Ross Sorkin, that appeared in the New York Times on January 16.
“Society is demanding that companies, both public and private, serve a social purpose,” Mr. Fink wrote in a letter sent to business leaders. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
“It will be a lightning rod for sure for major institutions investing other people’s money,” said Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management and an expert on corporate leadership. “It is huge for an institutional investor to take this position across its portfolio.” He said he’s seen “nothing like it.’’
In a candid assessment of what’s happening in the business world — and perhaps taking a veiled shot at Washington at the same time — Mr. Fink wrote that he is seeing “many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining.” He added, “As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges.”
It is a refrain that we’re hearing more and more from various pockets of the business community, and in fact last year company leaders found themselves taking stands on issues like immigration policy, race relations, gay rights and more.
But for the world’s largest investor to say it aloud — and declare that he plans to hold companies accountable — is a bracing example of the evolution of corporate America. Mr. Fink says he is adding staff to help monitor how companies respond; only time will tell whether BlackRock truly uses his firm’s heft to influence new social initiatives.
Part of Mr. Fink’s argument rests on the changing mood of the country regarding social responsibility. He contends that if a company doesn’t engage with the community and have a sense of purpose “it will ultimately lose the license to operate from key stakeholders.”
Companies often talk about contributing to society — sometimes breathlessly — but it is typically written off as a marketing gimmick aimed at raising profits or appeasing regulators.
Mr. Fink’s declaration is different because his constituency in this case is the business community itself. It pits him, to some degree, against many of the companies that he’s invested in, which hold the view that their only duty is to produce profits for their shareholders, an argument long espoused by economists like Milton Friedman.
Mr. Fink makes a point in his letter that the recent corporate tax cut could bring out the kind of activist investors he once denounced. “Tax changes will embolden those activists with a short-term focus to demand answers on the use of increased cash flows,” he said, “and companies who have not already developed and explained their plans will find it difficult to defend against these campaigns.”
Despite Mr. Fink’s insistence that companies benefit society, it’s worth noting he’s not playing down the importance of profits and, while it’s a subtle point, he believes that having social purpose is inextricably linked to a company’s ability to maintain its profits.
Click here to read the full New York Times article.
Click here to read Mr. Fink’s draft letter to business leaders.
BlackRock CEO’s Comments Boost the Mission of the Satell Institute
Laurence D. Fink’s comments are an authoritative illustration of the mission, vision and principles embedded within the Satell Institute.
We consistently inform AND prove to corporations that it is in their self-interest to support activities and initiatives that enhance the vitality of the community.
We pioneer the concept of “Think WE, not me” by organizing a Collective Force of Businesses and Nonprofits for the Greater GoodTM.
We demonstrate to public and private companies the value of having CSR integrated into their strategic direction.
Our mission, vision and principles have resonated with some of the leading companies in the region such as PECO, Bank of America, DuPont, and UGI to name a few. These forward-thinking companies know that the Satell Institute’s approach to CSR is good for their community and good for their business.