Major companies must put a greater focus on developing their long-term strategies at the same time as better communicating their "social purpose" to investors.
That's according to Larry Fink, CEO of investment firm BlackRock, writing in his annual letter to the CEOs of major companies.
Fink said that since the financial crisis of 2008, those with capital "have reaped enormous benefits. At the same time, many individuals across the world are facing a combination of low rates, low wage growth, and inadequate retirement systems."
"We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges."
According to Fink, it is the responsibility of companies to step up and formulate clear long-term strategies based around the concept of "social purpose."
"Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society."
U.S. companies must explain to investors how they plan to accommodate Congress' recent sharp cuts to corporate tax rates into their long-term strategies.
"What will you do with increased after-tax cash flow, and how will you use it to create long-term value? This is a particularly critical moment for companies to explain their long-term plans to investors."
Some of the specific questions Fink calls on companies to ask themselves include:
- What role do we play in the community?
- How are we managing our impact on the environment?
- 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 that will help them achieve their goals?
Marketers everywhere should consider how Fink's exhortations may impact their marketing strategies and how their content development plans can better promote and support themes of long-term sustainability. A longer-run approach to marketing that seeks to align corporate planning with community values is core to generating sustainable returns into the future.
BlackRock CMO Frank Cooper recently argued for the increasing importance of trust in business-to-consumer relationships.
Trust is not only essential for business growth but represents a significant opportunity for organizations that do it well, Cooper said.