The Six Trillion Dollar Man Speaks: Corporations Must Have A Purpose

No man is an island entire of itself; every man

is a piece of the continent, a part of the main;

…any man's death diminishes me,

because I am involved in mankind.

And therefore never send to know for whom

the bell tolls; it tolls for thee. [1]

We Are All in the Same Boat

This famous poem by the English poet John Donne summarizes much of what Larry Fink is communicating to CEOs through his annual letters, which he began sending in 2012. We are all in the same boat no matter who we are, where we live or where we work. Many of the problems we face as humans are global problems, and we can only solve them together. To be part of the solution, your corporation has to have a purpose beyond profit.

“Without a sense of purpose, no company, either public or private, can achieve its full potential... It will succumb to short-term pressures to distribute earnings… sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.” [2]

People want their working lives to be fulfilling beyond money.

In his 2019 letter, Fink defines what he means by “purpose.”

“Purpose is not the sole pursuit of profits but the animating force for achieving them. Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked.”

To effectively serve all stakeholders, a corporation first needs to stay in business, and it can’t do that without profits which are a direct correlation to a firm’s use of its resources to help solve pressing issues. Student debt is hanging over many young Americans like a storm cloud. The total student debt totals 1.6 trillion dollars. 1.4 trillion of this sum is owed to the U.S. Federal Government by 43 million borrowers. This has become a national issue for good or ill.  [3]

Paying the Cost of Higher Education for Your Employees

In the exact fulfillment of the type of actions Larry Fink is asking companies to perform, Walt Disney Company announced in August 2018, it would pay 100 percent of costs of tuition, fees, and books at Central Florida University. All 53,000 people Disney employs in Florida are eligible for the program, including all of their hourly workers. This won’t solve the national problem of student debt, but it will keep many thousands of students out of debt. Employees of the company will be able to get a college degree without fear of accumulating massive personal debts.

Disney did not say in its announcement but is obvious the corporation will attract highly motivated people of any age to work at Disney. There are plenty of talented young people with a good high school education who are fearful of racking up debt. Tourist destinations require lots of employees, and attracting those employees is difficult. One wonders how many people, experienced people jumped ship from one company to work at Disney for this benefit.

Disney and other companies that offer tuition reimbursement in full or part to their employees, something which is far easier to do now that many degree programs are taught entirely online, fits precisely with what Fink has observed.

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.

You don’t have to be a genius to realize that corporations which offer this type of assistance will attract the best job applicants. Mr. Fink repeatedly suggests that corporations need to focus on long-term growth, which will increase shareholder value. Paying for the education of your employees is an investment that will go a long way toward achieving this goal.

Resource(s):

[1] https://web.cs.dal.ca/~johnston/poetry/island.html

[2] https://www.blackrock.com/corporate/investor-relations/2018-larry-fink-ceo-letter

[3] https://www.nerdwallet.com/blog/loans/student-loans/student-loan-debt/

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Contributing Writer: Subject Matter Expert Charles McCain