A New Vision Of Work

© 2017 Bloomberg Finance LP

I was lucky enough to see my friends Larry Fink and Darren Walker at the Aspen Ideas Festival this year and listen to their panel conversation at the start of the colloquium. It was immensely encouraging. They are both taking dead aim at the central problem of our economy: how American companies have chosen profit as their only purpose—regardless of the impact on average Americans.

Fink is CEO and chairman of BlackRock Funds, world’s largest money management firm. Walker runs the Ford Foundation, the world’s fifth largest charitable foundation. These two men have the power to move mountains—at least when it comes to paradigms about how to make the world a better place. (Who knows, together they might have the resources to relocate an actual mountain as well.)

Fink has become a bellwether for a new business model: preaching in his public letters to CEOs about how companies need to dedicate themselves to all stakeholders, not simply shareholders. Likewise, Walker has directed the Ford Foundation to hone in on “the future of work,” hoping to loosen shareholder primacy’s grip around the neck of corporation leadership. In other words, these two thought leaders share the same vision. When it comes to the big picture, they are totally aligned: business has to awaken to an urgent sense of purpose that orients what companies do within fabric of the larger community. They need to make a profit in ways that will offer greater income equality and a better world.

Fink said that business has to reestablish its foundation on long-term thinking and a sense of societal purpose. The profit motive remains central, but only within guidelines about how to make it and distribute it in a just way.

I think we are on the cusp of real change. Profits are important. But for companies to have that, you have to be focused on all your stakeholders. The number one stakeholder is your employees.

He cited Johnson & Johnson, whose credo should be a model for any and all companies in the way it establishes a sense of integrity and purpose around which the corporation has operated for decades. “A firm like J&J has had a purpose from the beginning,” he told the audience. “It had a mission statement at the beginning, and it’s one of the reasons it has been sustainable as a profitable company. If you’re going to be a rising star company you have to be purposeful or you won’t have a sustainable business.”

BlackRock controls $6.8 trillion in assets. It’s influence over the world of business is incalculable. It has its hand on a spigot of money that can be opened or shut depending on how it assesses the mission and purpose of a companies seeking an infusion of BlackRock’s capital. I suspect you can do the numbers on Fink’s influence over the way companies do business.

Walker, in a similar way, is now steering his influential foundation toward a similar vision of the world of work. What’s interesting is that he wants to use the Ford Foundation’s resources to alter how we think about the role of private enterprise itself. Since the inception of the largest charitable foundations, these organizations began as a way for a wealthy industrialist to return his profits back to society in peripheral, beneficial ways after reaping the rewards of a capitalist enterprise without deep concern for the needs of society in general. Walker wants to use the Ford Foundation to reshape the way we make a profit and put it to use—in real time as it were—rather than as an afterthought and an amelioration, after the fact. It’s a new way to think not simply about business but also about foundations.

He summed up his vision at the conference in a reply to Fink:

A majority of people from 18 to 35 said they prefer socialism to capitalism. We can’t grant-make ourselves out of this dilemma. I don’t think generosity and charity is enough any longer. When you give, you feel better. That’s charity. Justice makes you uncomfortable because it makes you question the systems that have benefited you but disadvantaged those on the street in front of your building. The long-termism that you’ve been encouraging is hard to come by when they have a system that has no patience.

What is his vision of a new, more patient system? It is to eliminate the pursuit of short-term shareholder value maximization.

We had an era of the greatest era of social mobility in history, because we had an economy was designed to deliver shared prosperity. That economy was redesigned with a set of incentives . . . so we have a Gini coefficient of a developing country. As an asset owner, the Ford Foundation, I would like to put a nail in the coffin of the ideology of Milton Friedman that the only purpose of a firm is profits. That ideology will asphyxiate our democracy.

He wants to partner with any and all influential organizations—government, private sector, philanthropies, worker coalitions—to alter than ideology and steer business organizations toward a sense of long-term responsibility to all stakeholders. Mostly, he’s concerned about workers: their wages, their stake in the pursuit of profit, and their ability to see greater opportunities ahead within our system.

Fink is optimistic about the future. He believes he’s riding a wave of change that will reshape how the private sector understands its role in society. His prediction was unequivocal and confident:

You’ll be seeing in the coming months corporations will come out with a new definition of purpose. I actually see tangible changes by companies right now, focusing on it. I know a couple of the big business groups will be coming out in the next few months with their definition of purpose. It used to be the maximization of profits. You will see big business organizations come out with a redefinition of purpose including employees, clients, society, community.

Walker’s response was pithy and incisive. He said he hoped that this meant a “reallocation of capital,” meaning more money in the pockets of workers, both now and in the future. And, indeed, that’s the new, ancillary bottom line for business. If more and more thought leaders jump on board this train, I will be as hopeful as Fink. I will also be deeply grateful that free market capitalism can come to its senses and steer itself in a direction that takes more and more of us toward a better life.

In simple, clear terms, business governance must change from shareholder primacy to stakeholder capitalism, where all stakeholders—customers, workers, shareholders, the corporation itself and society at large—sit at a table where their interests are honored in equal measure.

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Peter Georgescu is the Chairman Emeritus of Young & Rubicam Inc., a network of preeminent commercial communications companies dedicated to helping clients build thei...