Memo To BlackRock: 7 Ways To Hold Corporate Feet To The Social Responsibility Fire
Friday, January 19, 2018
BlackRock, which manages a whopping $6.3 trillion, is hiring people to hold publicly-traded companies to a higher standard of corporate social responsibility, according to the New York Times.
I have been waiting 15 years for someone with that kind of clout to take action. But to paraphrase retired GE CEO Jack Welch, you can’t expect people to deliver what you can’t measure.
What is corporate social responsibility? Why does it matter? Isn’t it incompatible with boosting shareholder value? And how do you measure it?
Before answering those questions, it is worth mentioning that after the collapse of Enron and WorldCom back in 2001, I was feeling pretty disgusted with the state of corporate America.
So I wrote a book, published in 2003, called Value Leadership. One surprising thing I found in writing the book is that companies that follow the seven principles of Value Leadership — I called them Value Leaders — outperformed their peers on variables that investors care about.
For example, Value Leaders grew sales 35% faster and earned 109% higher net margins than their peers and they increased shareholder value almost five times faster than the market.
If Blackrock expects its companies to act in a socially responsible way, it has a big practical problem. How will it communicate what constitutes socially responsible action? and How will it measure whether or not companies are getting more or less socially responsible?
Photo courtesy of Véronique Debord-Lazaro.