Financial Times, January 24, 2017 article: "Larry Fink tells US companies to invest repatriated cash | BlackRock chief urges executives to use planned Trump tax reforms to boost US growth" [Largest investor's annual letter to portfolio companies reiterates need to use corporate capital for production of goods and services]

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Largest investor's annual letter to portfolio companies reiterates need to use corporate capital for production of goods and services

 

 

Source: Financial Times, January 24, 2017 article

FINANCIAL TIMES

Corporation tax

Larry Fink tells US companies to invest repatriated cash

BlackRock chief urges executives to use planned Trump tax reforms to boost US growth

Larry Fink © Bloomberg

[January 24, 2017] by: Stephen Foley in New York

US companies that bring cash back from overseas under the Trump administration’s proposed tax reforms should not use the money simply for share buybacks, BlackRock chief executive Larry Fink is demanding.

Mr Fink’s annual letter to the chief executives of the S&P 500 and other large companies represents a shot across the bows of groups that might be considering using repatriated cash to engineer a short-term boost to share prices.

BlackRock, the world’s biggest asset manager and one of the largest shareholders in most US companies, will demand evidence that companies have properly examined the best uses for the cash, he said.

“Companies have begun to devote greater attention to . . . issues of long-term sustainability, but despite increased rhetorical commitment they have continued to engage in buybacks at a furious pace,” he wrote.

“While we certainly support returning excess capital to shareholders, we believe companies must balance those practices with investment in future growth.”

President Donald Trump’s tax reform plans include incentives to unlock cash held by companies in overseas subsidiaries, by cutting the tax rate that they would otherwise have to pay if they brought the money back into the US.

The timing of any legislation on tax reform remains up in the air, however, despite broad agreement between the White House and the Republican majorities in Congress.

 

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While we certainly support returning excess capital to shareholders, we believe companies must balance those practices with investment in future growth


Larry Fink, BlackRock

The companies in the S&P 500 bought back $401bn of stock in the first nine months of 2016, according to S&P Down Jones Indices, after a record $426bn in the same period in 2015.

Mr Fink’s annual letter, made public on Tuesday, included an exhortation for chief executives to adapt their strategies in light of the backlash against globalisation that showed up in the Brexit vote and Donald Trump’s victory.

Mr Fink agreed last month to join a group of chief executives, led by Blackstone’s Stephen Schwarzman, that will advise the White House on economic growth, job creation and productivity.

 


Copyright The Financial Times Limited 2017.

 

 

 

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