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Larry Fink: businesses have to repair the social contract

BlackRock CEO and chairman said the public and stakeholders will hold companies to account if they don't.

Larry Fink: businesses have to repair the social contract

Larry Fink has told companies backed by BlackRock's $6.3 trillion (£4.8 trillion) in invested assets they must help repair a tattered social contract.

The chair and chief executive of the world's largest fund group said 'years of stagnant wages' and wider economic security were in danger of creating a cycle of 'wrenching political dysfunction'.

He said the business community too often viewed doing good and doing well as being in opposition. 

'Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked,' he wrote, in his annual letter to portfolio companies. 

'Profits are essential if a company is to effectively serve all of its stakeholders over time – not only shareholders, but also employees, customers, and communities.

'Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability.

'Purpose unifies management, employees, and communities. It drives ethical behaviour and creates an essential check on actions that go against the best interests of stakeholders.'

He encouraged companies to once again take a lead in the world of retirement and mimic support shown throughout most of the last century to staff until the end of their working lives - alleviating anxiety and stress along the way.

In the United States, the move to defined contribution plans left many workers stranded by the disproportionate level of responsibility.

The onus on workers to contribute towards their own pensions has corroded productivity and helped populist candidates at the ballot box, he want on to say.

To combat this, Fink argued: 'In response, companies must embrace a greater responsibility to help workers navigate retirement, lending their expertise and capacity for innovation to solve this immense global challenge.

'In doing so, companies will create not just a more stable and engaged workforce, but also a more economically secure population in the places where they operate.'

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