Larry Fink tells US companies to invest
BlackRock chief urges executives
to use planned Trump tax reforms to boost US growth
Larry Fink ©
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.
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.
certainly support returning excess capital to shareholders, we
believe companies must balance those practices with investment in
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
Copyright The Financial Times Limited 2017.