Social Purpose: New Model of Shareholder Engagement

Blackrock, the largest investor in the world, says it’s time to consider ‘social purpose’ along with profits.

Laurence Fink, CEO of BlackRock, the world’s largest investor, astonished corporate leaders everywhere in January 2018 with a letter telling them it was time they accepted responsibility for more than profits.

Fink called for a “new model of shareholder engagement” in which companies plan and demonstrate how they make positive contributions to society. He put corporate leaders on notice that BlackRock, which has an estimated $6 trillion under management, would be watching and making its own investment decisions based on whether companies demonstrated that they were serving a “social purpose.”

Fink’s letter was a direct repudiation of nearly 50 years of accepted wisdom among business leaders. In 1970, Nobel economist Milton Friedman crystallized what has become a boardroom tenet: “The social responsibility of business is to increase its profits.”

But BlackRock, Fink explained, sees governments “failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining.” Consequently, it is up to businesses to “respond to broader societal challenges,” he wrote.

Sustainability advocates cheered. Fink’s letter “has been more than 100 years in the writing,” said Jack O’Brien, managing partner of an ethical purpose agency that, coincidentally, is named ONE HUNDRED.

The problem, O’Brien said, is that companies exposed by scandals are often the same ones with celebrated CSR programs. “These companies had CSR initiatives sitting on the periphery of corporate leadership,” he said. “Corporates (need) to look at how such ethical purpose can be brought to the center of their business, rather than resting on the sidelines.”


“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.”

“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.”

“The time has come for a new model of shareholder engagement …”

“… (You) must also understand the societal impact of your business as well as the ways that broad, structural trends – from slow wage growth to rising automation to climate change – affect your potential for growth.”


“Companies must ask themselves: 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 will help them achieve their goals?”

The full text of the letter is here