01/24/2018

CEOs in Davos — Are they talking your language?

Author: Colm Kelly, Global Tax and Legal Services leader  Kelly

Davos’s theme of growth in a fractured world is actually about skills, jobs, wages, responsibilities, and opportunities. It’s a conversation business, policy makers and society need to have says Colm Kelly.

This year’s business leaders are arriving at the World Economic Forum in Davos, Switzerland with the highest level of optimism about global growth since 2012. But, even with all this optimism, there are some real anxieties about what is happening in wider society.

PwC’s CEO Survey shows that CEOs are the anxious optimists. It comes on the back of a lot of reflection last year (including our own with the T20 on how today’s economic and political upheavals reflect an ongoing misalignment between business and economies (on the one hand) and acceptable societal outcomes (on the other)).

Across the world, business leaders report increasing anxiety about broader societal threats — such as geopolitical uncertainty, terrorism and climate change. These threats outpace the more familiar threats to business growth prospects such as exchange rate volatility and changing consumer behaviour. Two out of three business leaders are concerned about populism as a threat to growth (35% extremely concerned; 42% somewhat concerned).

The threats that trouble CEOs are increasingly existential. And the issues of fairness, transparency and are at its core.

This greater level of understanding and awareness of the threats to growth that are beyond the control of business alone is an important aspect of the changing role of business in society. It’s also marks a shift in the public’s expectation of CEO’s influence and action on how growth will be achieved in the short, medium and long term.

CEOs believe the focus on delivering results in shorter periods of time (60%) is still the main challenge. However, following this, there is a significant shift with the majority reporting higher levels of pressure to hold individual leaders to account (59%), including for misconduct. Over a third report more pressure from employees and customers to take political and social stances (38%) in public.

In the Banking and Capital Market, Healthcare and Technology sectors, the profile of leadership accountability was higher than average. So too were expectations in the US (70%), Brazil (67%), and the UK (63%). High-profile debates on diversity, immigration, social inclusion and pay equity have raised employees’ expectations of leadership to engage in political and social issues, particularly in the US (51%), China (41%) and the UK (38%).

This is part of a shift in how the CEO is having to see their responsibilities as leaders, their organisations’ as employers, and their business’ purpose in society.

When we talk to our family and friends in our homes, park, cafe or the office, we don’t tend to talk in the language of a business’ purpose and the systemic changes that are needed to make sure the economy serves society. We do talk about tax and wages. We talk about job security, opportunities, and the state of our areas, schools, the future of education and healthcare.

The feeling that business leaders don’t talk about or address these issues has long contributed to the underlying mistrust between business and society. What this year’s CEO survey is telling us is that these issues are now in the boardroom.

Take the impact of technology for example. While recent research by PwC showed that workers were optimistic about technology improving their job prospects, CEOs reveal that helping employees retrain, and increasing transparency on how automation and AI could impact jobs is becoming a more important issue for them.

Two thirds of CEOs believe they have a responsibility to retrain employees whose roles are replaced by technology, chiefly amongst the Engineering & Construction, Technology and Communications sectors. 61% of CEOs build trust with their workforce by creating transparency, at least to some extent, on how automation and AI impact their employees.

Business leaders’ opinion is divided again this year on whether future economic growth will benefit the many or the few. Globally 48% believe widespread economic growth will benefit more people, 46% say it will benefit fewer. When asked if globalisation has helped ‘close the gap between the rich and the poor’, nearly 40% of CEOs respond “not at all’.

And yet in the short term we see much more collaboration reported between leaders in business and education, and policy makers. 73% are collaborating with educators and policy makers to improve the employability of future workers. Even within their own businesses, 86% are now implementing continuous learning and development programmes to support attracting and developing digital talent.

Following a long period of globalisation, increased fragmentation is driving business leaders’ views of how we measure prosperity around the world. CEOs across every region and country recognise that the world is moving away from measuring prosperity primarily through financial measures, for example GDP, and towards measuring prosperity through multifaceted metrics, including quality-of-life indices.

This is particularly true in Latin America. North America lags behind the global consensus with nearly 40% of CEOs siding with traditional financial measures. Still, 57% agree that the world is moving in the direction of multifaceted metrics. Defining those metrics and capturing the data to accurately measure them will be a priority agenda item in the coming years.

People’s expectations — whether of their employer, or of business more broadly — are rightly high.

We’ve spoken before about the shift in the role of business in society. What once sounded academic is now becoming very real.

This year, business leaders in Davos need no reminders of the importance of enabling societal progress. It’s become a part of their day job. The results will be better for us all.

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