January 19, 2018
This week, Blackrock CEO Larry Fink's annual letter to CEOs made international headlines with its emphasis on the necessity of corporations playing a strong social role to the effective execution of a long-term value creation strategy. Citing dismal projections on government preparation for issues such as automation, infrastructure, worker retraining, and retirement readiness, the letter states:
The letter details the investment giant's expectations of companies and the issues on which BlackRock will focus regarding engagement with the companies it owns this year. As in prior years, Mr. Fink emphasizes the importance of articulating a long-term growth strategy that has been reviewed by the company’s board. However, this year, the letter further indicates that BlackRock is expanding engagement; that “a company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth;” and that BlackRock is “increasingly integrating these issues into [its] investment process.” He states that in preparation for engagement:
"[S]ociety increasingly is turning to the private sector and asking that companies respond to broader societal challenges. . [T]o prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
We will be discussing whether the expectation and/or obligation for companies to address these issues has changed, and the role of the CHRO with respect to them, at our 2018 CHRO Summit on March 9-10.
“[C]ompanies must ask themselves: . . . 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? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?”