Last week, Larry Fink, Chairman & CEO of BlackRock, issued his 2018 letter to CEOs and caused quite a stir. Characterized by some as a shot across the bow – “contribute to society or else” – this year’s letter appears to be a call to action for greater corporate social responsibility.
Chatter abounded on the need for greater engagement as well as increased consideration of and disclosure on environmental, social and governance issues. With this chatter came a corresponding level of hand-wringing about exactly what all this means and the best way to do it.
This is all well and good. I don’t dispute these are important matters that need attention. But let’s take a deep breath. I believe Fink titled his letter “A Sense of Purpose” because he wants to engender a more fundamental and thoughtful discussion among boards and management, saying:
“Without a sense of purpose, no company,
either public or private, can achieve its full potential.”
Fink further elaborates that without a sense of purpose, the company will succumb to short-term pressures and sacrifice the investments in employee development, innovation and capital expenditures necessary for long-term growth and ultimately provide subpar returns to investors.
One of the more thoughtful reactions I saw was from Judith Samuelson, Vice President, The Aspen Institute. Samuelson echoed sentiments raised here in a previous blog post, and challenged boards and managements to ask questions like:
- What is our purpose? What do we aim to do as a company?
- Where are we most vulnerable?
- Are we a good neighbor?
To her questions, I would add:
- How does (or should) our purpose shape our culture?
- How does our purpose create value (for customers, employees, communities and shareholders)?
- Do our strategies, tactics and actions support this purpose and create value?
Answering fundamental questions like these can create a framework and focus for decision-making throughout an organization. This doesn’t eliminate the profit motive – indeed profits are essential to long-term value creation. Instead, “is it profitable today and in the future?” becomes one of the screens that lead companies to better define their goals, anticipate change, execute more robust strategies and sustainably deliver growth.
Ultimately, I believe that by knowing its purpose and how that purpose creates value, a company can create a more resilient, aware and aligned organization. And, therein we will see the value of purpose.
Lead-IR Advisors, Inc.
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