CEO of Blackrock investment firm calls on companies to make positive contributions to society

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5 February 2018

Commentary: CEOs must address human rights, environmental & governance challenges in own operations

Author: Amol Mehra & Camille Gervais, Intl. Corporate Accountability Roundtable

“Morality & the Market"

For too long, the dominant narrative around the market has been to maximize profit and prioritize redistribution to shareholders...The consequences of companies’...behavior...have led to a general distrust of corporations...It is within this context that recent efforts by CEOs...offer an opportunity to course correct the very nature of the market...Morality is perhaps finally entering the market...but it is not enough...CEOs have focused on key political issues...but ignored other pressing human rights...CEOs must understand that morality should be measured not just from statements and commitments, but rather from evidence that a company is itself addressing human rights, environmental, and governance challenges in its own operations…

[Also refer to: BlackRock, Apple, Microsoft, Amazon]

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18 January 2018

Commentary: Larry Fink's letter to CEOs is about more than "social initiatives"

Author: Judith Samuelson, Quartz at Work

By any measure, Larry Fink’s letter to CEOs this year is a game changer... Fink in his letter excels at both clarity and simplicity: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he writes in the opening paragraphs. New York Times writer Andrew Ross Sorkin, in turn, while writing about an early release of the letter that reaches CEOs on January 23rd, called BlackRock’s objective “new social initiatives.”

... More “social initiatives” will not fix our problems... Fink is not asking companies to engage in more philanthropy. We cannot meet the challenge of today with charity or workplace volunteerism. Instead, we require a solid new foundation for business operations and decision rules, and that requires change in both the C-suite and board rooms... Larry Fink... is asking business to get interested—to pay attention to the unintended costs of doing business and changing social norms, and to be bold in a time of low trust and a glaring disconnect between ‘value’ and values... Charity and ‘social initiatives’ are unsustainable. What business leaders need now is to re-knit some of the fraying fabric that holds us all together; to conduct their businesses as though they, themselves, are on the other end of the pipe, live on the other side of the wall, are the counter party in the contract. The country, and the world needs our business leaders to get this right. [refers to Amazon, VW, Wells Fargo, Uber]

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17 January 2018

BlackRock sees the light – but will they follow through?

Author: Ali Pinkerton, Oxfam

...Should BlackRock really follow through with policing and punishing companies that perform poorly on social indicators, and if other investors fall in line, we could be witnessing a watershed moment in defining the role of the private sector in addressing social and environmental change. Smaller socially responsible investment shops, progressive pension plans, and faith-based investors have long called for better corporate behavior toward vulnerable populations. But BlackRock, a mainstream investor through and through that, aside from supporting a shareholder proposal to require Exxon Mobil to enhance climate disclosures, has shied away from activism, has an opportunity to seriously move the needle here – if they follow through.

... The letter cites a number of social issues – widespread popular discontent, inadequate retirement systems, low wage growth, automation – as symptoms of an economy that... has been serving the owners of capital at everyone else’s expense... Companies, BlackRock demands, should act as stewards of all their stakeholders – including employees, customers, and communities. In doing so, BlackRock brings new credence to concerns that Oxfam has raised in the past... [W]e are encouraged by the language in this letter, which in large part aligns with our own analysis of the factors that underlie inequality and how financial markets incentivize these outcomes.  

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16 January 2018

BlackRock CEO tells companies to contribute to society

Author: Peter Horst, Forbes

"BlackRock CEO Tells Companies To Contribute To Society. Here's Where To Start," 16 Jan 2018

...On January 12, BlackRock CEO Larry Fink sent a letter to CEOs of public companies telling them that they’re responsibility not only to deliver profits, but also to make “a positive contribution to society.”... Fink lays out a number of requests which one might find surprising from a $6 trillion asset manager. He cites the pre-occupation with short-term, reactive measures to drive quarterly profits and asks CEOs to focus on “investments in employee development, innovation and capital expenditures that are necessary for longer-term growth.”... 

Fink [called]... for CEOs to seize the mantle of leadership in making the world a better place, beyond simply delivering profits. He sees governments as failing in their duty to address the major challenges that loom in the future: “As a result, society is increasingly turning to the private sector and asking that companies respond to broader societal challenges.”... He cites environmental impact, workforce diversity, community engagement and employee re-training as among the larger issues companies must grapple with.

... The challenge he lays out is to... deliver financial returns and make the world better at the same time... Here is a set of key steps to follow: start with core values and beliefs; assess your risk profile; pick a focused, credible issue; get the right guidance... [refers to Dove & PepsiCo]

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16 January 2018

Larry Fink's annual letter to CEOs: a sense of purpose

Author: Larry Fink, BlackRock

...Since the financial crisis, those with capital have reaped enormous benefits. At the same time, many individuals across the world are facing a combination of low rates, low wage growth, and inadequate retirement systems. Many don’t have the financial capacity, the resources, or the tools to save effectively; those who are invested are too often over-allocated to cash. For millions, the prospect of a secure retirement is slipping further and further away – especially among workers with less education, whose job security is increasingly tenuous... We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders.

...The time has come for a new model of shareholder engagement – one that strengthens and deepens communication between shareholders and the companies that they own... BlackRock recognizes and embraces our responsibility to help drive this change... In the United States, for example, companies should explain to investors how the significant changes to tax law fit into their long-term strategy...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... Where activists do offer valuable ideas – which is more often than some detractors suggest – we encourage companies to begin discussions early, to engage with shareholders like BlackRock, and to bring other critical stakeholders to the table.

... Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? 

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15 January 2018

BlackRock’s message: contribute to society, or risk losing our support

Author: Andrew Ross Sorkin, New York Times

On Tuesday, the chief executives of the world’s largest public companies will be receiving a letter from one of the most influential investors in the world... Laurence D. Fink, founder and chief executive of the investment firm BlackRock, is going to inform business leaders that their companies need to do more than make profits — they need to contribute to society as well if they want to receive the support of BlackRock... [which] manages more than $6 trillion in investments.... [According to Fink],... 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.‘‘... 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.”

... Mr. Fink has in the past denounced “activist” shareholders as too focused on the short term. “If you asked me if activism harms job creation, the answer is yes,” he told me back in 2014. Now he is changing his stripes... In 2016, the firm withheld support from two directors as a protest against Exxon’s “non-engagement” policy, which barred independent board members from meeting with shareholders like Mr. Fink. Then, in 2017, BlackRock supported a shareholder proposal to enhance the company’s disclosures on climate... BlackRock voted in favor of activist-led proposals in 19 percent of proxy fights last year and that number is likely to rise. [refers to Apple & ExxonMobil]

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