Think long term - Larry Fink's message to CEOs

[NEW YORK] BlackRock Inc's Larry Fink wants chief executives of top US companies to focus on creating long-term value instead of emphasizing quarterly targets.

Fink, who heads the world's largest investment management firm, said companies should still report quarterly results and"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," Fink wrote in a letter to CEOs obtained by Reuters.

BlackRock, which has US$4.65 trillion in assets under management, has voted with activist investors, pushing for long-term value creation 39 per cent of the time in the 18 largest US proxy contests in 2015 by market value, Fink said.

He also asked companies to involve board members in reviewing long-term plans and "explicitly affirm" to shareholders that their boards have reviewed their strategic plans. "This review should be a rigorous process that provides the board the necessary context and allows for a robust debate. Boards have an obligation to review, understand, discuss and challenge a company's strategy," he wrote.

Fink also suggested that companies focus on environmental and social factors affecting them. "For too long, companies have not considered them core to their business - even when the world's political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord," he wrote.

BlackRock's corporate governance team will look for the suggested changes and a board review while engaging with companies, Fink wrote.

REUTERS