And here’s why that’s a good thing
Laurence D Fink has been helming BlackRock for nearly three decades now, ever since it was founded in 1988. The New York City-headquartered firm is one of the world’s most prolific and largest investment management firms. Last month, he sent a letter to his fellow CEOs to ensure that they take steps to build on their CSR activities and create long-term plans to create a positive impact on society or that they would “lose the license to operate from key stakeholders.” In plain speak, invest in CSR or the funding pipeline to your company will turned off.
Why should CEOs listen to Fink?
As of 2017, BlackRock reportedly had $5.7 trillion in assets under management or over five per cent of financial assets worldwide. Fink has the power to rock stock markets and pull the financial lifeline on companies should he choose to.
A good example of Fink’s BlackRock following through with its warnings was last year, when BlackRock led what the Washington Post described as a “Shareholder rebellion” against ExxonMobil. It forced the oil major to clearly outline and commit to measures it would undertake to maintain climate change to two degrees centigrade. BlackRock along with Vanguard owned 13 per cent of ExxonMobil or $43.6 billion worth of shares at the time. The oil company would know better than to look the other way.
This isn’t the first time that Fink has tried to rally CEOs to give back to society. As part of the Chairman’s Letter in the 2016 annual report, he outlined his message of creating long-term value creation for society. This year’s letter though was a little more forceful in its tone with the line “To prosper over time, every company must not only deliver financial performance, but also show how to make a positive contribution to society” underlined.
There was some pushback to Fink’s call to companies to focus on giving back to society and to focus on more than just merely generating profits. One of the most prominent detractors was billionaire investor Sam Zell who chairs five NYSE-listed companies and called Fink’s statement “extraordinarily hypocritical”. Conscious that his letter could be perceived as a demand for companies to invest in CSR, Fink stated in an interview with CNBC that he wasn’t trying to strong-arm CEOs to adopt his worldview.
With some of the world’s biggest business owners from Warren Buffet, Bill Gates and Mark Zuckerberg down, already committing to philanthropy in a sizeable way, Fink’s letter might be the wake-up call that other CEOs need to ensure that their businesses aren’t selfish or merely profit-driven.