Larry Fink, CEO of BlackRock, the world’s largest investor with $6 trillion under management, evoked heated controversy with his remarks last week that his company would change its hiring and potentially its compensation structure to advance diversity and ensure that five years from now the company is not just “a bunch of white men.” This follows on the heels of his annual letter to CEOs asserting that companies need to embrace a purpose beyond just profit maximization.
Critics, according to Fox Business, were swift to accuse Fink’s commitment to diversity as a form of “corporate socialism,” complaining about “the propriety of a public company executive using business resources and his perch as CEO to advance a personal agenda.” The Fox article went on to quote Charles Elson, a corporate governance expert at the University of Delaware, saying: “This is fundamentally not the role of a public company, and it’s unfair to investors who may not agree with his politics. A CEO shouldn’t use house money to further a goal that may not create economic returns.”
I couldn’t disagree more. Business leaders must finally, once and for all, let go of the outdated and erroneous notion that social factors — and not just diversity — are irrelevant to the economic success of our companies.
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