“If part of the driver of economic growth globally is sentiment, than I think that good things are about to happen in the global business community,” said Joel Kurtzman, lead partner in charge of the survey, which was released Thursday at the World Economic Forum in Davos, Switzerland. “We are poised at the cusp–and this is global.”
Nearly three quarters of CEOs surveyed say they are either very (26 percent) or somewhat (46 percent) confident in their companies’ growth prospects, and about half say they are more confident now than they were a year ago, according to the survey. By region, confidence was lowest in South and Central America, which is not surprising given the political and economic instability in Venezuela and the collapse of Argentina’s economy. Only 20 percent of CEOs in that region report that they are very confident in their companies’ growth prospects in the coming year. Confidence was highest among African CEOs: 55 percent say they are very confident and 38 percent say they expect revenue growth of more than 20 percent this year–well above the global averages.
“We found that CEOs (worldwide) are gaining confidence in their own growth prospects if not in the economy as a whole,” wrote Samuel DiPiazza Jr., CEO of PriceWaterhouseCoopers International, in the report’s introduction. “Yet that confidence is fragile and could easily be derailed by another major terrorist action or war in the Middle East or North Korea.”
About half of the CEOs surveyed rate terrorism and the prospect of war (48 percent) as significant threats to their companies’ growth prospects–and slightly more (49 percent) say the same about overregulation. War and governmental overregulation are seen as bigger threats to future growth than price deflation, weakness in emerging markets, even stock-market volatility.
Just 29 percent say the impact of corporate misdeeds posed a very significant threat. But they indicate that rebuilding investor trust was among their top concerns. Though nearly three quarters (73 percent) of CEOs say public trust in their specific company has not declined, they say it has in corporations, auditors and market analysts in their country and in capital markets in general. And 62 percent say the current financial scandals are more widespread than the few “bad apples” that got caught. “We must regain the trust of investors and the general public,” wrote a CEO from Spain.
When asked what they have done toward that end, 63 percent say they have improved risk-management procedures, while 43 percent say they’ve implemented new internal procedures. Only one quarter of respondents say they’ve separated the roles of chairman and CEO, while about the same percentage reported adding more independent or nonexecutive directors to their boards. And, while a third of companies in North America have stopped using their auditors for consultancy, most companies in other parts of the world have not.
Forty-eight percent of the CEOs polled worldwide say the steps taken by U.S. regulators so far were reasonable, though one quarter say they don’t go far enough and 15 percent say they reach too far. “So many CEOs have done something as a result of the scandals … rather than just paying lip service to issues that have sullied business reputations over the last year,” said Kurtzman. “Overregulation or overreaction to these issues of Enron and other scandals is a real concern. Companies have already taken their own steps to put their own houses in order.”
CEOs say they are also taking the issue of sustainability (how their business affects the environment, community and society at large) more seriously in trying to improve their relationship with shareholders, customers and the community. The vast majority (87 percent) of CEOs say they have taken measures to address values, ethics and codes of conduct within their organization, while 76 percent say they are working on employment equality and diversity and 71 percent are addressing the environmental impact of their business operations. However, less than half (48 percent) say they are now “managing” human rights and child-labor issues and only 40 percent are now taking action on greenhouse-gas emissions.
Still, there are indications that companies that have not tackled those issues yet plan to do so within the next few years.
Two thirds of CEOs surveyed insist that sustainability is not just a public-relations issue–only half of CEOs felt that way a year ago. And a surprising 71 percent say they were even willing to consider sacrificing short-term profitability, if necessary, in implementing a sustainability program to ensure long-term shareholder value. “To say that in this kind of environment where everyone’s earnings are under the microscope shows a sense of the need for real integration of business into the community,” said Kurtzman. “Companies recognize more and more that they are part of the society, not apart from it.”
The sixth annual PriceWaterhouseCoopers Global CEO Survey included responses from 992 chief executives at some of the world’s largest corporations. The largest proportion–more than 400 of the CEOs surveyed–came from Europe, with the remainder from Asia, South and Central America, North America, and Africa, respectively.
