Larry Fink, founder and CEO of BlackRock, which the New York Times calls the world's largest investor, recently addressed a letter to the leaders of every business in its considerable portfolio, warning them to deliver much more than strong financial returns. In the letter, Fink opines, “Society is demanding that companies, both public and private, serve a social purpose,” and that “[t]o prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
Fink concludes the letter firmly by laying out the following clear expectation to BlackRock portfolio companies: "Today, our clients – who are your company’s owners – are asking you to demonstrate the leadership and clarity that will drive not only their own investment returns, but also the prosperity and security of their fellow citizens. We look forward to engaging with you on these issues."
The movement going on in business leadership today to a new formulation of value that includes adherence to socially beneficial values is more than a trend. In the letter to his portfolio CEOs, Fink is unmistakably directing the attention of leaders to fundamental social and economic problems that are pulling the people of the United States apart right now. Fink writes, "For millions, the prospect of a secure retirement is slipping further and further away – especially among workers with less education, whose job security is increasingly tenuous. I believe these trends are a major source of the anxiety and polarization that we see across the world today."
To meet Fink's and BlackRock's expectations, job number one for any business leader is to to state clearly why your organization exists and what it's vision and values are. Job two is to lead your team through a process of articulating a plan to bring that purpose to life consistently and with rigorous accountability. Anything less is no longer good enough and you heard it not from Ben and Jerry's but from the head of an investment firm with more than $6 trillion under management.
Easier said than done. But if you are a chief executive, or the head of a division or team, remember the Toyota slogan: "You asked for it; you got it."
Arriving at a productive vision and values position is an iterative process best accomplished with engagement and input of internal and external stakeholders, of course mediated by you, the leader, and reflecting something you believe in and can drive. Next comes the task of articulating how you intend to operate the business in a manner that is emblematic of that vision and values in all aspects. Some of your stakeholders (like your investors, if they are anything like Fink, or the communities where you operate, more likely) will expect more than you are ready to deliver. That's why it is essential to stay in relationship with them all on an ongoing basis. In the process, you will identify problems to manage earlier than most, and opportunities for true distinction and even competitive advantage.
The diagram below which we developed here at Emblem Strategic illustrates the dynamic where a leader and the vision and values of her enterprise are in the middle, surrounded by six common external sources of pressure and influence. Of course, every organization is different and always changing. You'll have to go through the exercise yourself to make this meaningful in your business.
A note about what you are seeking to clarify when you do the hard work that lies at the center of the graphic above:
Vision is nothing without values that help you and your people make good decisions across your entire organization. BlackRock's Fink is hardly the first mainstream business leader to sound this alarm and call for more socially responsible leadership from business. Plenty has been written about the false dichotomy of "doing well and doing good" that students of US schools of business have been sold for generations. Thank Milton Friedman for putting values and value in separate buckets and for speaking about this separation as if it exists in the state of nature (it does not). Friedman famously wrote, "few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible." (Capitalism and Freedom, 133 (1982))*
In fact, contrary to the Friedman formulation, the corporate statute in Massachusetts reads as follows: “In determining what the director reasonably believes to be in the best interests of the corporation, a director may consider the interests of the corporation’s employees, suppliers, creditors and customers, the economy of the state, the region and the nation, community and societal considerations, and the long-term and short-term interests of the corporation and its shareholders…”. (Mass. Ch. 156D, Sec. 8.30)
If you fail to define your purpose with clarity and conscience, or if you work from the outside in, always reacting and never making a commitment to core values, you'll never get ahead. And apparently you won't be getting funding from BlackRock either.
Emblem Strategic is a coaching and consulting firm that specializes in public affairs and strategy. We help exceptional leaders align their values and their value proposition. The results we seek are impact and advantage.
*Special thanks to Vertex Pharmaceutical founder and former CEO and Chairman Joshua Boger for directing me to both this Friedman quote and the unexpected richness of the corporate statutes themselves. He spoke eloquently using these exact references in a 2010 address to the Phi Beta Kappa society at Wesleyan University.