Larry Fink on The Power of Capitalism
Every year, Larry Fink, CEO of Blackrock, writes a public letter to CEOs.
Blackrock is the world’s largest asset manager. Blackrock, along with Fink’s letter, is highly influential among the western world’s business leaders. Since 2018, his annual letters have had one consistent central theme: businesses that want to last the distance must have a clear social purpose.
This year’s letter continues the theme. It is titled “The Power of Capitalism”.
I urge you though to read the letter in its entirety.
Because the business world as we have known it for the last five decades is radically shifting. It is changing in response to the market - the employee market, the consumer market and the investor market.
Recently some push back to what is being labelled “Woke Capitalism” has been reported. However, more often than not we can find that these claims are coming from those that benefit the most from 'business as usual'. The kind of change we are experiencing will be resisted by those for whom the system has delivered enormous wealth in the past.
Today’s business leaders will need to decide whether to tether themselves to the standards of the past, or to respond to the changing expectations of the market and lead a more responsible, equitable way of doing business fit for the present and future.
To whet your appetite, here are some of the take-outs from Larry Fink’s letter:
“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.”
“In today’s globally interconnected world, a company must create value for and be valued by its full range of stakeholders in order to deliver long-term value for its shareholders.”
“At the foundation of capitalism is the process of constant reinvention – how companies must continually evolve as the world around them changes or risk being replaced by new competitors. The pandemic has turbocharged an evolution in the operating environment for virtually every company.”
“It’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, and a long-term view. Your company’s purpose is its north star in this tumultuous environment.”
“Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success.”
“Young, innovative companies have never had easier access to capital. Never has there been more money available for new ideas to become reality. This is fueling a dynamic landscape of innovation. It means that virtually every sector has an abundance of disruptive startups trying to topple market leaders. CEOs of established companies need to understand this changing landscape and the diversity of available capital if they want to stay competitive in the face of smaller, more nimble businesses.”
“Every company and every industry will be transformed by the transition to a net zero world. The question is, will you lead, or will you be led?”
“We focus on sustainability not because we're environmentalists, but because we are capitalists and fiduciaries to our clients. That requires understanding how companies are adjusting their businesses for the massive changes the economy is undergoing.”
“Our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders.”
Read Larry Fink’s full 2022 letter here https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter