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Introduction
The performance of organizations exerts influences on local communities, customers, employees, investors, suppliers, public authorities, social agencies, and other stakeholders. Therefore, despite todays toughening economic conditions, complex business environment, and orientation towards profit-making, corporations bear responsibility to all ranks of stakeholders. While defining its strategic priorities and planning business activities, a responsible organization should evaluate and adjust them to stakeholders expectations. However, although all companies strive to boost their reputation as socially responsible organizations, their contribution to society frequently appears to be marketing gimmicks. By referring to the online article Commentary: The BlackRock Letter Sets Ambitious Goals. Heres How CEOs Can Meet Them published by Pozen (2018), this paper will discuss what an approach promulgated by BlackRock, Inc. will entail for its partners and other stakeholders.
Situation Description
The publication Commentary: The BlackRock Letter Sets Ambitious Goals. Heres How CEOs Can Meet Them is focused on the implications of an annual letter sent by Laurence D. Fink, the head of the largest investment corporation in the world, to chief executive officers of both public and private companies (Pozen, 2018). The letter serves as guidelines for BlackRocks partners on strict adherence to the principles of corporate social responsibility. In his letter, Fink states that BlackRock will only provide financial support to those organizations that benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate (Pozen, 2018). Companies should prioritize stakeholders expectations over short-term profits.
According to Finks message, public and private organizations should envisage strategies that simultaneously ensure the achievement of long-term financial results and the implementation of stakeholder-focused policies. The orientation towards stakeholders benefits is viewed as a potential determinant of better financial performance in the long term (Pozen, 2018). The approach to corporate responsibility proclaimed by Fink requires senior managers to devise key performance indicators (KPIs) to assess the correlation between stakeholder-oriented initiatives and long-term financial returns during specific periods (Pozen, 2018). These KPIs will serve as success metrics to remunerate top executives.
Discussion
Undoubtedly, partners financial dependence on BlackRock, Inc. predetermines the fact that they will adhere to the set course. However, Pozen (2018) accentuates that Finks well-intentioned requirements for responsible business performance evoke some ambiguities. For instance, a wage increase can be assessed as both a strategy of attracting talented and skilled employees for shareholders prospective benefits and fair redistribution of rewards caused by tax cuts. Relocation of a companys facilities for long-term financial purposes is another controversial point because this step cannot satisfy various stakeholders simultaneously. Pozen (2018) provides an example of moving a factory from Mexico to Michigan to demonstrate how a company will contribute to one community and destitute another. Moreover, such external factors as an economic conjuncture, prospects for the industry development, level and dynamics of competition, legislative restrictions, financial risks, and so forth can influence the organizational potential for the contribution to societal needs.
However, Finks approach is in line with a current transformation of the shareholder model into the stakeholder model of socially responsible corporate management. Instead of increased profitability and provision of profits to shareholders, the concept of company stakeholder responsibility implies the involvement of employees, customers, partners, regulatory authorities, social institutions, suppliers, distributors, local communities, and society as a whole in the process of business decision-making and resource allocation.
Despite some concerns about short-term losses of profits that are apparent from the article content, eventually, socially responsible endeavors of companies contribute to their profitability. Social actions improve the environment in a local community or eliminate the need for state regulations. In a community that is more prosperous from a socio-economic point of view, conditions for business performance are more favorable. In addition, even if short-term costs associated with social actions are high, in the long run, they stabilize profits because customers, suppliers, the community, and other stakeholders become more loyal to an organization.
The necessity to implement the company stakeholder responsibility model is connected with changes in public attitudes towards corporations. Business-related social expectations have radically changed over the last decades. Since contemporary businesses possess significant human and financial resources, they are perceived as able to spend them on societal needs. Organizations should redesign their practices and adjust them to stakeholders needs. Nevertheless, socially responsible organizations will benefit from their contribution to society. For instance, an organization could spend more than the law requires on waste disposal in order to project a better image to environmentally conscious consumers (Pozen, 2018). Thus, companies involvement in solving social problems becomes both expected and necessary for narrowing the gap between emerging public expectations and possible organizational responses.
Finks approach is rooted in moral obligations to act responsibly. Any company is a member of society; therefore, moral norms should also govern its performance. As well as other members of society, organizations must perform their operations in a socially conscious manner and contribute to the strengthening of moral foundations. What is more, irrespective of industries, companies actions must emanate from ethical values, established laws, and social norms in order to promote a society based on order and legitimacy.
Implications for Management
The article Commentary: The BlackRock Letter Sets Ambitious Goals. Heres How CEOs Can Meet Them (Pozen, 2018) encompasses far-reaching implications for management and organizations. Laurence D. Fink suggests the model that ensures positive impacts on society and profits for shareholders. He emphasizes that both public and private companies should serve social goals, including unemployment issues, retirement problems, immigration policies, infrastructure development, environmental pollution, and many others (Pozen, 2018). These social responsibilities to stakeholders are not limited to organizations financed by BlackRock, Inc. Regardless of a business or industry, sustainability-based management allows companies to exert positive influences on stakeholders and provide steady business development.
In line with Finks approach, management of socially responsible organizations should include the following components:
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Increasing knowledge of the topicality of socially responsible business activities at different levels of an organization;
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Development of stakeholder-oriented corporate values and principles;
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Identification of all participants of socially responsible initiatives and clarifications of their interests, needs, and expectations;
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Business performance grounded on the principles of socially responsible behavior;
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Development of mechanisms of internal audit and control over the implementation of stakeholder-focused programs;
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Determination of key performance indicators (KPIs) for the assessment of the correlation between social initiatives and long-term financial returns within estimated periods;
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Evaluation, monitoring, coordination, and redesign of socially responsible activities of a company.
Summing up, the concept of company stakeholder responsibility involves the obligation of contemporary corporations to make a positive impact on the development of society, including its social, economic, and environmental spheres. Although resources and funds allocated for social needs entail a financial burden for a company, in the long run, they bring profits to both stakeholders and shareholders.
Reference
Pozen, R. (2018). Commentary: The BlackRock letter sets ambitious goals. Heres how CEOs can meet them. Web.
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