The annual missive from the CEO of the largest money manager in the world is out today. Simply addressed “Dear CEOs” these letters read a bit like a letter from your dad, with “suggestions” on how to be a better CEO. It’s advice that you can take, or…take, given that with about $6 trillion in assets under management, Larry Fink wields a wee bit of power. While much of BlackRock’s money is invested in index funds (and thus not directed subjectively,) the impact of Fink’s disapproval of your firm is one not to be tested.
Read Now: In his 2019 letter to CEOs, Larry Fink explores the inextricable link between purpose and profits. https://t.co/piZU76QeSP #CEOLetter pic.twitter.com/hTpBax81iR
— BlackRock (@blackrock) January 17, 2019
CEO power extends far beyond the confines of the job description. The job includes decisions on whom to partner with, where to invest and create jobs, who to hire and fire. But with each of those decisions, a CEO implicitly or explicitly reinforces a company’s values and purpose. They can choose to use that power to make the world a better place or not. They can choose to be activists or not. Larry Fink is using his power to push CEOs to use their power. (It’s all very meta.)
Over the years (past letters are also on BlackRock’s site), Fink has pushed CEOs to think about governance, prioritizing long-term strategy, and the theme of this year’s letter, to build social purpose into the company’s fabric.
He calls on business leaders to step in where governments are failing.
“Stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively.”
“As CEOs, we don’t always get it right,” he writes. “Companies cannot solve every issue of public importance, but there are many – from retirement to infrastructure to preparing workers for the jobs of the future – that cannot be solved without corporate leadership.”
Moreover, “Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues.”
It’s this failure of government to make substantive progress on the issues of our day that we need CEOs to both partner with and challenge government, whether it be on universal basic income, pipelines, or homelessness. While Fink hasn’t explicitly called for CEO activism, he’s leading by example.
He has been clear that he’s not going to tell CEOs what their companies’ social purpose should be, just that he expects them to have one. And in that way, Fink is using his personal clout, backed by the weight of his company, to push for good.
Of the many ways that CEOs can be activists, this is one of the most powerful. Fink has effectively created an urgency, an impetus, and air cover, for CEOs to have conversations with their management teams, their boards and their shareholders about how to build social purpose into the fabric of their company. He’s even giving them the language to use (and he put it in bold font so you don’t miss it): “Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.”