ADVERTISEMENT
ADVERTISEMENT

Everyone at Davos is talking about 'Larry's letter'

BI PRIME: Larry Fink, the founder of the $6.3 trillion asset manager BlackRock, sent a letter to CEOs everywhere on January 16.

  • Larry Fink, the founder of the $6.3 trillion asset manager BlackRock, sent a letter to CEOs everywhere on January 16.
  • A week later, it's a big topic of discussion at the World Economic Forum in Davos, Switzerland, where the global elite have gathered for a week of meetings, panel discussions, dinners, and parties.
  • While the response has been broadly positive, there are certain aspects of Fink's letter that some executives have taken issue with. One person went so far as to say some are "pissed off" with it.
  • BlackRock has committed to ramping up its investor-stewardship initiative, with the team doubling in size over the next three years. That means "Larry's letter" is going to live on as a topic of conversations in boardrooms around the world for months to come.
  • This post is part of Business Insider's ongoing series on

DAVOS, Switzerland — Everyone is talking about "Larry's letter."

The Larry they're referring to is Larry Fink, the founder of the $6.3 trillion asset manager BlackRock who last week sent a letter to CEOs of public companies stressing the need for a clear long-term strategy and an understanding of the societal impact of their business.

"Without a sense of purpose, no company, either public or private, can achieve its full potential," Fink said in the letter. The BlackRock founder then detailed what could happen to companies lacking a sense of purpose:

ADVERTISEMENT

"It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives."

The letter seems to have reverberated around boardrooms around the world. At the World Economic Forum in the Swiss Alps, it has become a talking point for many of the corporate executives attending. And while the response has been broadly positive, there are certain aspects of Fink's letter that some executives have taken issue with. One person went so far as to say some are "pissed off" with it.

In all of these conversations, one question keeps coming up. What counts as a sense of purpose?

Fink's letter can be split in two, with one portion focused on the need for a long-term strategy. And it's here that most of the people we've spoken with in Davos are in agreement. In his letter, Fink said "companies must be able to describe their strategy for long-term growth."

ADVERTISEMENT

He adds:

"The statement of long-term strategy is essential to understanding a company's actions and policies, its preparation for potential challenges, and the context of its shorter-term decisions. Your company's strategy must articulate a path to achieve financial performance."

The idea here is pretty straightforward, but ask around and you'll hear that the number of companies that lack this statement of a long-term vision is surprisingly high. And as one top executive told Business Insider, with no concept of the destination, every direction is the right (and wrong) way to get there. If CEOs are clear on where they're intending to take the business, in contrast, it's much easier to chart the progress, and if necessary, correct course.

But where Fink's message seems to have struck a nerve, is where it shifts to the idea that CEOs "must also understand the societal impact of your business." He said in the letter (emphasis BlackRock's):

ADVERTISEMENT

There are typically three responses to this.

BlackRock has committed to ramping up its investor-stewardship initiative, with the team doubling in size over the next three years under the new leadership of Barbara Novick, a vice chairman who helped found BlackRock.

That means "Larry's letter" is going to live on as a topic of conversations in boardrooms around the world for months to come, whether CEOs like it or not.

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

7 do's and don’ts of the Holy month of Ramadan

7 do's and don’ts of the Holy month of Ramadan

Top 5 sweetest celebrity mother-child relationships that stand out for us

Top 5 sweetest celebrity mother-child relationships that stand out for us

International Women's Day: 5 Nigerian female celebrities championing women’s rights

International Women's Day: 5 Nigerian female celebrities championing women’s rights

Top 5 female directors in Nollywood

Top 5 female directors in Nollywood

6 things that will break a Muslim's fast during Ramadan

6 things that will break a Muslim's fast during Ramadan

5 benefits of fasting during Ramadan

5 benefits of fasting during Ramadan

5 reasons Easter was more fun when we were children

5 reasons Easter was more fun when we were children

Dos and don’ts of supporting Muslims during Ramadan

Dos and don’ts of supporting Muslims during Ramadan

Here are common things people rarely dream about

Here are common things people rarely dream about

ADVERTISEMENT
ADVERTISEMENT