Laurence D. Fink, founder and chief executive of BlackRock, the world’s largest institutional investor, recently set the financial world abuzz with a letter to the CEOs of the world’s largest public companies. He notified them that henceforth BlackRock will be holding them accountable for more than profits. They must also contribute to society.
Business Insider called it “a warning shot to CEOs across the world.” The New York Times suggested, “It may be a watershed moment on Wall Street.” The Harvard Business Review asked, “Does Wall Street Finally Care About Sustainability?” Barron’s said, “When BlackRock talks, people listen.”
At least some on Wall Street are getting the message that even though the economy is growing, it isn’t working for most people and government is failing to provide for their unmet needs. Fink went on to observe that “…[s]ociety increasingly is turning to the private sector and asking that companies respond to broader societal challenges… To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
From his argument that embracing their social responsibilities will create long-term value for corporate shareholders, one can imagine Fink has been reading Harvard Business School professor Michael Porter, who has for years advocated letting business solve massive social problems like climate change and access to water. Porter reasons that “when business solves a problem, it makes a profit—which lets that solution grow.”
Porter’s argument has become compelling to the growing number of national and global advocates of socially responsible investing. This includes the three largest institutional investors in the United States, BlackRock, Vanguard, and State Street. Together they manage combined assets of $11.5 trillion. All aggressively profess a strong commitment to corporate responsibility. Sounds great: Be more responsible and make more money.
There is just one problem. Corporations are created, structured, and managed to make profits for their owners. The bigger, more global, and more monopolistic they become, the better they are suited to using financial and political power to extract profits at the expense of workers, society, and the environment.
At their best, profit-seeking corporations are equipped to seek only those solutions to social and environmental problems that promise to benefit those with the money to pay for them. Without the profit motive or government subsidies, corporations are ill-equipped to address the social and environmental needs of the far greater number of people who struggle to cover the costs of daily living. Furthermore, when corporations do find potentially profitable solutions, they use their monopoly control of those solutions to maximize profits—as they have become infamous for doing with life-saving pharmaceuticals.
Corporations, especially global corporations that have shed their commitment to any country or place, are ideally suited to making a few people fabulously wealthy while pillaging the Earth and reducing workers to lives of desperate servitude.
Monopoly power separated from community control doesn’t work, whether we put that power into the hands of a few billionaires and call it capitalism, or into the hands of a few government bureaucrats and call it socialism. Capitalism and socialism, as we know them, both concentrate monopoly power disconnected from the people the economy properly serves.
Fortunately, there are clear alternatives. They rest on three simple truths.
1. The purpose of the economy is to support people seeking to make a living for themselves and their families.
2. Ownership is power, and in a full and overstressed world, the economy is most likely to serve the needs of everyone when ownership of the means of living is equitably distributed and broadly shared.
3. The institutions of government and business serve best when they have strong roots in communities of place and are accountable to the people they serve.
These truths serve as the foundation of a wide range of initiatives and experiments. They may be called New Economy, Solidarity Economies, Living Economies, Sharing Economies, Local Economies, Cooperative Economies, or Regenerative Economies. All feature strong local roots, ethnic and racial diversity, citizen leaders, and the sharing of power. All benefit from responsive government and the dismantling of corporate power.
I fully applaud Fink’s call for corporate social and environmental responsibility, but that alone is not an answer. I long for the day when the world’s money managers and corporate CEOs announce their intention to join with citizen activists to get money out of politics, break up concentrations of corporate power, and create economies that support all the world’s people in making a living in coproductive partnership with the ecosystems in which they live. Perhaps that day is getting just a bit closer.