Purposeful

That’s what BlackRock Chairman and CEO, Larry Fink’s annual letter to CEOs is: purposeful.  Purposeful in its language. Purposeful in its thinking. Purposeful in its intent to advance a dialogue about corporate purpose.

Yes, purpose.  It’s a concept that befuddled many last year who seemed to think that serving a corporate purpose was antithetical to profits.  Yet, as Fink laid out in 2018, companies without a sense of purpose cannot reach their full potential and will ultimately deliver subpar returns.  This year, Fink further expands upon this concept, noting that:

“Purpose is not the sole pursuit of profits but the animating force for achieving them.
… when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability.”

In Fink’s view, corporate purpose informs strategy, guides culture and provides a decision-making framework.  With clarity of purpose, organizations can become more resilient, aware and aligned, making them better prepared to adapt and evolve.

Fink’s perspective appears to be resonating more deeply this year.  Perhaps this is due to today’s more volatile and uncertain environment and the erosion of trust in government and media.  It may also reflect the current debate about shareholder primacy and the role of business in society.  What we do know is the general public and institutional investors increasingly look to business to be a bulwark of trust in an increasingly dystopian world according to the 2017 Edelman Trust Barometer.

So, what’s a company to do?  First, I dare say most companies do have a purpose, but it hasn’t been front and center in their thinking.  This is probably the hardest part.  It requires companies to thoughtfully answer and act on questions like:

  • What do we aim to do as a company? Why do we or what we do matter?
  • Where are we most vulnerable?
  • How does (or should) our purpose shape our culture and strategy?
  • How does our purpose create value (for customers, employees, communities and shareholders)?
  • Do our strategies, tactics and actions support this purpose and create value?

The answers to these questions need to be communicated internally via employee townhalls, new employee on-boarding, training programs, etc. and externally via the company’s website, the CEO’s annual shareholder letter, investor days as well as 10-K and 10-Q filings.  As part of its engagement efforts, BlackRock will be looking for this type of information in a company’s external communications.

For those who still pooh-pooh the concept of corporate purpose, I ask:  Isn’t, for example, a consumer product company that offers new products to make consumers’ lives easier or more enjoyable … or an industrial manufacturer making equipment that enables factories to operate more effectively … each serving a social purpose?  Don’t we expect companies to consider the upstream and downstream implications of their activities and be good corporate citizens? For an example of a company that adheres to its purpose while delivering results, read Judith Samuelson of The Aspen Institute recent Quartz at Work posting which highlights Southwest Airlines.

In the end, there’s a purpose for it.  Be purposeful about it.

Lisa Ciota
President/Founder
Lead-IR Advisors, Inc.

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