Fink, the chief executive of investing giant BlackRock, said Tuesday he will scrutinize how corporate giants like Apple plan to use the cash they bring back to the US as part of a tax holiday backed by US President Donald Trump.
During his election campaign, Trump backed a policy of cutting taxes on cash that countries repatriate as a way to entice them to invest their overseas money in the United States.
But in a letter distributed on Tuesday, Fink warned the tax cuts may do little to boost economic growth as big corporations funnel the cash into buying their shares back or paying a dividend — boosting their stock prices but not hiring new employees or growing their businesses.
Companies such as Apple, Pfizer, and Microsoft hold nearly $1.8 trillion overseas, Moody’s Investors Service Inc estimated last month. By doing so, they avoid a 35 percent US corporate tax rate.
Critics charge that Apple CEO Cook has lately used the iPhone maker’s growing cash pile, worth more than $200 billion — for share buybacks to boost Apple’s stock price — and thereby his own compensation — instead of research on new products.
“If tax reform also includes some form of reduced taxation for repatriation of cash trapped overseas, BlackRock will be looking to companies’ strategic frameworks for an explanation of whether they will bring cash back to the US and if so, how they plan to use it,” Fink wrote in an annual letter to the CEOs of the S&P 500.
“Will it be used simply for more share buybacks? Or is it a part of a capital plan that appropriately balances returning capital to shareholders with prudently investing for future growth?”
BlackRock oversees $5.1 trillion in assets, ranking as a top shareholder of many of the world’s largest companies. It votes on the composition of those companies’ boards as well as on governance proposals from management and shareholders.
Fink also said US lawmakers should raise the threshold at which capital gains on investments are taxed at a reduced rate, from one year to three years, to reward long-term investment.
Fink called on companies to do more to re-train current employees to develop the skills needed to fill technical positions and to help workers cope with the transition to more work being automated.
“Businesses will need to increase the earnings potential of the workers who drive returns, helping the employee who once operated a machine learn to program it,” Fink said.
Fink, who had donated to Democratic presidential candidate Hillary Clinton, recently joined an advisory council to Trump that includes several other CEOs.