More than two-thirds (67%) of the world’s largest company CEOs say that they are likely to take public stands on politically charged issues related to global challenges, according to the EY CEO Imperative Study 2019. The survey of 200 CEOs, 100 senior institutional investors and 100 independent board members also finds that 76% of board directors and 79% of investors say they are likely to support a CEO taking a stand. In addition, according to 57% of CEOs, 63% of board directors and 54% of investors believe it is in the best interest of large companies for CEOs to take a more active role on global challenges. The majority of CEOs (57%) see more opportunity than risk in taking action on global challenges and close to half of board directors (49%) and investors (42%) support this view.
Institutional investors embrace rather than resist corporate action
Calls for the move to inclusive and long-term growth are also starting to impact investment decisions as 60% of investors report supporting long-term investing to address global challenges, even when near-term performance may be diminished.
A company’s stance and actions on global challenges is an increasingly important investment criteria, with more than half (55%) stating that CEO activism on global challenges have been frequently/very frequently and 35% of investors stating that CEO activism on global challenges have been occasionally taken into consideration for funding decisions in the last two years. Crucially, 83% of investors say that corporate stance/actions on global challenges will become a more important factor in decision-making over the next five years.
“Currently, it’s not enough that good, or even better, figures be regularly reported on a quarterly basis. Investors, and employees themselves, expect their companies and top management to take a position on broader topical issues such as climate change, the emergence of artificial intelligence and income inequality,” says Štěpán Flieger, Director of EY’s M&A Department.
C-suite not suited to the demands of the next decade
Only one-third of respondents (34%) believe the C-suite model is well-suited to the demands and opportunities of the next decade. However, CEOs and boards have been changing the face of the management model, with top positions added over the last five years including chief innovation officer, chief digital officer and chief strategy officer.
But additions and changes to the C-suite are still being planned, with 72% of CEOs expecting to add positions or change roles on the C-suite and 82% of boards reporting the same. The top five new C-suite capabilities critical to company’s continued growth according to CEOs are: digital transformation (55%); innovation (53%); artificial intelligence (43%); data science (33%); and behavioral science (25%).
“As is true of the general population, demand for key knowledge and skills is changing at the level of corporate top management in tandem with social and technological change.So, it’s even more imperative for top management than for employees to ‘be equipped with the key skills of the future’ (Future Skills). These undoubtedly include an awareness of the possibilities and development of artificial intelligence and the use of digital technologies. However, it’s also important to combine these ‘hard’ skills with traditional leadership skills such as communication, teamwork, creativity or critical thinking,” says Vladislav Severa, Managing Partner of EY’s Advanced Data Analysis Team.
Global CEOs see growth upside of addressing global challenges
CEOs around the world report that national and corporate cybersecurity, job losses from technological change and income inequality are the top three global challenges threatening business growth and the global economy over the next five to ten years. Additionally, board directors (58%), institutional investors (54%) and CEOs (51%) all believe to a great/very great extent that corporate action is needed to solve the top global challenges.
CEOs increasingly report that they are taking actions to address global challenges with the top actions reported being:
- 60% of CEOs say they have aligned their corporate purpose
- 47% of CEOs have established partnerships with governments or NGOs
- 45% have adopted a corporate reporting framework incorporating non-traditional concepts of value, and have participated in industry or cross-industry coalitions
However, boards and investors prioritize actions that drive internal transformation, indicating some misalignment between CEOs and these groups. The top two actions boards and investors want to see:
- Integration of the global challenges into corporate strategies (59% of boards and 50% of investors rank this as their top priority for CEOs)
- Linking of internal governance, performance measures and rewards to global challenges (with 47% of boards of 43% of investors ranking as another top priority)