USA TODAY International Edition
Our view: Social consciousness can be good for business
BlackRock might not be the world’s most widely known investment company. But with more than $6 trillion under management, it is the largest. And that makes its CEO, Larry Fink, a bit like the EF Hutton of the old commercials. When Larry Fink talks, people listen.
Lately, Fink has been doing some serious talking. He sent a letter to more than 1,000 corporate CEOs worldwide telling them to get involved in socially responsible causes or risk falling out of favor with his investors.
Fink didn’t exactly spell out what he had in mind when he said companies have a responsibility to make “a positive contribution to society,” and not to just “deliver financial performance.” But he did note that wealth concentration is at historically high levels and that too few workers are setting aside money for retirement.
Overall, we think that Fink is on to something. Governments, which traditionally have taken the lead on these kinds of issues, have largely punted. In some cases, they have been downright complicit in these disturbing trends.
What’s more, corporate responsibility programs can be good for companies in improving their brand, increasing employee engagement, and even helping them innovate. The consumer products company Unilever, for instance, developed more cost-effective ways of making hair conditioner through a campaign to use less water.
Even so, Fink’s words are impossibly vague. CEOs could dismiss them simply by saying they don’t know what he means. They might also argue — not without reason — that wealth creation itself is a social cause.
To get the attention of corporate leaders, many of them gathered at this week’s World Economic Forum in Davos, Switzerland, we suggest that Fink list some specific actions.
One target would have to be the confiscatory pay packages that top executives have carved out at the expense of shareholders. Income inequality and declining retirement resources have been driven by technology and globalization, but also by surging top-end pay at publicly held companies. Adjusted for inflation, average CEO compensation has risen more than 900% since the 1970s.
Another approach might be to accept the argument that wealth creation is a social cause — and then take it to its logical conclusion. All companies are not equal. Some make a lot more money than others. Some pay their workers a lot more. Some make money by imposing higher health care and environmental costs on societies.
Fink could convey to CEOs that if they want taxes on their profits to remain low in an era of mounting budget deficits, they should act pre-emptively to reduce the burdens they impose and make themselves less of a target.
In the final analysis, Fink is right for one simple reason. Corporations have long claimed to be the equivalent of persons, a move that gives them rights of political speech and due process, among other things. They can hardly be people when it suits them and soulless profit machines the rest of the time.