Larry’s Eights

The first time I read one of Larry Fink’s annual letter to CEOs, was in 2018. I remember opening up my LinkedIn app, scrolling through posts, and stumbling upon one, that had a link to a New York Times article written by Andrew Ross Sorkin on January, 15th. In the letter, Larry had urged CEOs to make sure the companies they run, not only delivered in profits and return, but importantly have a sense of purpose, to contribute to the society.

Since then, I have always looked forward to his annual letters, to read and analyze and get a glimpse of the direction and stand that the largest investor in the world takes to hold companies that BlackRock invests in, accountable.

To date, Larry’s annual letters to CEOs amount to a total of eight (8), hence the tittle of my article, “Larry’s 8s”. The letters dating back to 2012, all have a common theme, urging the CEOs to make sure they align with their shareholders and adopt a long term approach to maintain sustainability. And not to say, each year, the letters have gotten much longer than the previous one (not that I am complaining, I have found them to be quite insightful).


In his first annual letter to CEOs, Larry urged companies BlackRock invests in, to uphold corporate government practices consistent with long term business performance and address issues that may be raised during proxy season. He insisted for companies to be successful, they ought to consistently adhere to good corporate practices, as it is a foundation for sound management, adminstration and effective operations, which is likely to help them deliver required results.

To read the letter, click here


I still do not know why he waited two years to issue another letter addressing CEOs, after the previous one in 2012. Nevertheless, in this penmanship, he acknowledged the progress that companies were showing in upholding corporate practices and engagement with shareholders, sighting their consistency with long term business performance. CEOs were asked to communicate effectively with their shareholders about the company’s long term strategy for growth, as doing so, will set the stage to attract patient capital they seek

When you look keenly on this, you will find it to be true. In order for companies to be successful, CEOs and the Management are to be transparent to shareholders on the direction the company is expected to take, strategies in place, what drives real value, how and when certain far-sighted investments will deliver accurate returns and metrics that shareholders will use to assess the success of the management team.

In event of little or lack thereof communication between the Management and the Shareholders, the management is likely to succumb to the pressure of delivering more on short term performance for quarterly earnings, at an expense of increase in debt or slashing capital expenditure. This move, however relevant, jeopardizes the company’s ability to generate sustainable long term returns.

He added, companies should hold a balanced capital strategy, whereas, significant investment is to be placed on innovation, product enhancements capital and plant equipment, employee development, internal controls and technology, so as to foster long term returns and sustainable growth. When favorable, they should accomodate buybacks and dividends increase.

To read the letter, click here


Following his previous address, Larry emphasized that for companies to focus on delivering long term value, each stakeholder has to be engaged and effectively play the part. This will rid off respective firms, the pressure, to deliver short term value.

The pressure mainly comes from the media attention and activists shareholders, who are not patient, and demand returns quickly. Media giants like CNBC, Bloomberg whom during earnings season, produce round clock news about the financials (profits, dividends, buybacks etc), which in turns puts pressure on companies that trade publicly, to push more on delivering the best quarterly earnings. Such pressure, shift their focus from the prize, which significant growth and long term investments.

The Government, on the other hand should foster public policy which fosters long term holdings. The respective jurisdictions within which these companies operate in, should enact proper tax policy, that incentivise long term investment.

To read the letter, click here


The letter to CEOs this year emphasized on the message addressed in the previous years, with strong push on Boards to take an active role in strategic planning and affirm the plans that the Management have come up with.

We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans. BlackRock’s corporate governance team, in their engagement with companies, will be looking for this framework and board review.

Companies should feel obligated to be open and transparent about their growth plans so as shareholders can evaluate and track their progress in executing those plans.

What reasonated with me, was highlighting the fact that many shareholders’ letters tend to reflect on the past, rather than the focusing on communicating on the perspective about the future. CEOs should make an effort in their shareholders’ address to review in details their competitive landscape, innovation, technological disruption, geopolitical scene, talent recruitment and development, industry financial metrics and a suitable framework for long term growth. In his own words;

Annual shareholder letters and other communications to shareholders are too often backwards-looking and don’t do enough to articulate management’s vision and plans for the future.

The benefits of clear communication and transparency is seen, during times when companies operate in a dynamic environment facing uncertainties or challenges, and they are able to easily pivot in a way that they respond to the current situation or wave accordingly. This is because, when investors are aware of well-articulated plans, ecosystems they operate in, competitive landscape, technology and innovation impacting their businesses, they will still maintain full faith in the companies they invest in, hence offer full support to any steps that their fiduciary will undertake while patiently riding out the wave, in order to attain the sustainable long term returns vision.

To be clear, we do believe companies should still report quarterly results – “long-termism” should not be a substitute for transparency – but CEOs should be more focused in these reports on demonstrating progress against their strategic plans than a one-penny deviation from their EPS targets or analyst consensus estimates

Policymakers should also put more effort to create a nurturing environment for the companies and the economy in general. The public policy they enact should foster long term investments and job creation. Government Administrations in the world should launch tax policies that support long term holdings and also should invest heavily on infrastructure, which will in turn offer job creation and rid off the burden imposed on companies to do so.

To read the letter, click here


To re-iterate his call to CEOs to communicate long term growth strategy with their shareholders, Larry urged that companies should also communicate how their strategic framework will reflect and impact changes happening in the global landscape.

We look to see that a company is attuned to the key factors that contribute to longterm growth: sustainability of the business model and its operations, attention to external and environmental factors that could impact the company, and recognition of the company’s role as a member of the communities in which it operates. A global company needs to be local in every single one of its markets.

He also urged companies to invest in their employees, secure retirement system for all of them, and also educate them on how to prepare for retirement. Such devotion, shows that the companies cares for it’s employees and not only about their output. Companies have financial literacy and power, to empower their employees to make smart decisions on retirement investments, so as their finances can be secured, even after they leave the workplace. This will help the retirement crisis, and enable workers to adjust accordingly to the world and attain economic security after serving a particular company for a long time.

To read the letter, click here

2018: A Sense Of Purpose

This letter has to be my favorite, because I could relate to the theme it carried. As an Individual, I want to work for a company that I believe in and the one that is responsible towards the society.

To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.

Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.

A company that operates with a sense of purpose, towards it’s employees (providing them with better retirement, remuneration packages, health packages), are more likely to add morale to their workforce, to deliver beyond what is expected of them. Also stakeholders such as consumers, investors also expect the company to be able to take stands on issues that they hold dear.

In these times we live in, companies are expected to take a stand against discrimination of any kind, environmental preservation and also have a diverse workforce (whom investors, consumers ad other stakeholders can identify with).

Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?

Larry’s stance also reasonate with companies that attract talent and investments, as they understand, to sustain that, they have to positively contribute to the society. Companies like Salesforce, which successfully integrated their purpose into the corporate culture and strategy. It grants 1% product, 1% equity and another 1% employee time for philanthropic purposes. It has also been on a forefront to advocate for diversity in the workplace and it has gone to battle with policymakers in Georgia state for gay rights, protesting the freedom bill, which would have negatively discriminated against the LGBTQ community. From inception, their leader Marc Benioff, has been determined to build a company that make a positive impact to the society. As a result, Salesforce has ended up as a favorable workplace according to Fortune Magazine every year, as such values have attracted the best and brightest to not only join the software company, but also stay in the long run.

To read the letter, click here

2019: Purpose & Profit

 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

In his 2019 address to CEOs, Larry Fink explained how Purpose and profit are interlinked, and that when a company clearly understand their purpose in the society, they will be bound to operate in a discipline and spectrum that will drive long term profitability. When there is a common purpose, the management and employees will all be unified to work towards delivering the common goal. It will lay a foundation for the corporate culture, ethical framework and decision making process that will be consistent with sustaining long term financial returns for the shareholders.

As the world is evolving, there is a significant shift in wealth from the old generation towards the new generation, or better known as millenials. Also, this group of people, the so called millenials represent, over 30% of the workforce. They, compared to the much older group, prefer to work in places that have a sense of purpose and responsibility towards the society they operate in. They think fast, welcome innovation and technology, and have no regard of hierarchies, and are not afraid of showing so. To maintain longevity, companies need to recruit new talent and also seek investors (whom currently come from the same pool of millenials), which will in turn help them stand a test of time. A company, whose purpose is effortlessly embedded in it’s strategy and culture is in a much better position to end up with the talented pool and millenials’ money as lucrative investment.

It is important for companies to understand, as time passes, this generation will serve as a large potion of it’s investors and employees, hence their sentiments will influence the decisions that have a direct impact on sustainability and longevity.

To read the letter, click here

2020: A Fundamental Reshaping of Finance

His latest letter, perhaps his most talked about yet, the man who runs the world’s largest asset manager made a strong stand in support of protecting the climate. In the wake of many activists being on the headlines to advocate for taking care of the climate, more companies are forced to take responsibility of operating respectively, to avoid the looming climate crisis, which has a negative impact on the society.

Investors are increasingly reckoning with these questions and recognizing that climate risk is investment risk. Indeed, climate change is almost invariably the top issue that clients around the world raise with BlackRock. From Europe to Australia, South America to China, Florida to Oregon, investors are asking how they should modify their portfolios. They are seeking to understand both the physical risks associated with climate change as well as the ways that climate policy will impact prices, costs, and demand across the entire economy.

Larry insisted that for sustainability to prevail, intiatives are to be drawn, to ensure the portfolio is constructed with consideration for risks involved, exit process and government response on climate change. In a letter to his clients, the world’s largest asset manager with almost $7 trillion in investments, is leading the charge, addressing his clients in clear transparency on intiatives that BlackRock will take to ensure sustainability, is the center of Investment approach.

In the short term, some of the work to mitigate climate risk could create more economic activity. Yet we are facing the ultimate long-term problem. We don’t yet know which predictions about the climate will be most accurate, nor what effects we have failed to consider. But there is no denying the direction we are headingEvery government, company, and shareholder must confront climate change.

In order for the climate and mother earth to be protected, relevant stakeholders such as investors, regulators, public should all be informed on strategies that will manage sustainability in relation to climate change.

 Climate change is different. Even if only a fraction of the projected impacts is realized, this is a much more structural, long-term crisis. Companies, investors, and governments must prepare for a significant reallocation of capital.

More and more people, and in some cases, employees are calling out institutions and companies they buy from, or work from, to be responsible towards the environment. This, then, emerge as an investment risk, as it can cause a dent on the purchasing power, a drop in sales which in turn matures as an investment risk. As a result, it is a wise choice for companies to plan a strategic reallocation of capital in investments that will serve a purpose and offer profits to respective investors.

On the forefront on this change, are the young generation, the likes of Greta Thunberg, who have shown relentless and unwavering passion calling out conglomerates, institutions and even governments to address the climate change issue with transparency and honesty in favor of the Earth. As wealth and power shifts to this portion of the population, there is no doubt that their influence will drive companies to uphold a sense of purpose and social & environmental responsibility, as an approach to maintain sustainability returns and longevity.

As we approach a period of significant capital reallocation, companies have a responsibility – and an economic imperative – to give shareholders a clear picture of their preparedness. And in the future, greater transparency on questions of sustainability will be a persistently important component of every company’s ability to attract capital. It will help investors assess which companies are serving their stakeholders effectively, reshaping the flow of capital accordingly. But the goal cannot be transparency for transparency’s sakeDisclosure should be a means to achieving a more sustainable and inclusive capitalism. Companies must be deliberate and committed to embracing purpose and serving all stakeholders – your shareholders, customers, employees, and the communities where you operate. In doing so, your company will enjoy greater long-term prosperity, as will investors, workers, and society as a whole.

The letter could not be more relevant to the modern times we are currently living in. Big Companies are now competing for Climate Leadership, publicly outlining their climate intiative. Giants like Amazon making billions of dollars as a climate pledge and Microsoft announcement, earlier this year, pledging zero emissions by 2030, which is ten (10) years less of that mark pledged by Amazon (2040). Companies and countries that do not address this issue, are bound to face a backlash, market skepticism, which will end up costing them a lot of capital in the years down the drain.

To read the letter, click here

When the letters are examined as a whole, one might notice how they are a reflection of how the financial landscape has played out over the years. The message conveyed across is clear, there are fundamentals that are shaping the way companies operate. And if, the vision of your company is to remain in effective operations for a long time, then you have to adapt, or risk being eliminated. Consumers, Employees, Regulators and even Investors are all demanding companies that they are affiliated with to be social and environmental conscious, in their quest to produce positive returns.