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Investors and boards support CEO action on global challenges


Comments / {{hitsCtrl.values.hits}} Views / Thursday, 22 August 2019 00:08


 

  • Ernst &Young survey finds 60% of global institutional investors surveyed (Asia-Pacific 56%) support investment that improves long-term business prospects even if it diminishes short-term corporate performance 
  • Cybersecurity, job loss due to technological change and income inequality are top global challenges, CEOs report
  • Just 24% of Asia-Pacific board directors surveyed believe that C-suite suited for the challenges of next decade 

 

More than two-thirds (global 67%, Asia-Pacific 63%) 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 (of which about 40% are from Asia-Pacific) also indicates that 76% of global board directors (Asia-Pacific 73%) and 79% of global investors (Asia-Pacific 74%) say they are likely to support a CEO taking a stand. 

In addition, 57% of CEOs (Asia-Pacific 55%), 63% of board directors (Asia-Pacific: 59%) and 54% of investors (Asia-Pacific 55%) surveyed 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 (global 57%, Asia-Pacific 56%) see more opportunity than risk in taking action on global challenges and close to half of board directors (global 49%, Asia-Pacific 54%) and investors (global 42%, Asia-Pacific 47%) support this view. 

EY Sri Lanka Country Managing Partner Ruwan Fernand said: “CEOs, boards and investors recognise they have a role to play — along with the public sector — in addressing social challenges that speak to their values and in pursuing inclusive, sustainable growth. It’s encouraging to see signs of support within the investment community for long-term value creation.”

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 global investors (Asia-Pacific 56%) 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 of investors (global 55%, Asia-Pacific 60%) stating that CEO activism on global challenges have been taken frequently/very frequently, and 35% of global and Asia-Pacific investors stating that corporate stance/actions on global challenges have been taken occasionally, into consideration for funding decisions in the last two years. Crucially, 83% of global investors (Asia-Pacific 86%) say that corporate stance/actions on global challenges will become a more important factor in decision-making over the next five years.

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 (global 58%, Asia-Pacific 51%), institutional investors (global 54%, Asia-Pacific 53%) and CEOs (global 51%, Asia-Pacific 45%) 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 global CEOs (Asia-Pacific 51%) say they have aligned their corporate purpose to addressing global challenges

- 47% of global CEOs (Asia-Pacific 44%) have established partnerships with governments or NGOs

- Less than half of global CEOs have adopted a corporate reporting framework incorporating non-traditional concepts of value (global 45%, Asia-Pacific 37%), and have participated in industry or cross-industry coalitions (global 45%, Asia-Pacific 47%)

However, boards and investors prioritise actions that drive internal transformation, indicating some misalignment between CEOs and these groups. The top two actions boards and investors want to see:  

1. Integration of the global challenges into corporate strategies (global 59% of boards and 50% of investors, Asia-Pacific 61% of boards and 49% of investors, rank this as their top priority for CEOs); and

2. Linking of internal governance, performance measures and rewards to global challenges (global47% of boards and43% of investors, Asia-Pacific 46% of boards and37% of investors, rank this as another top priority).

C-suite not suited to the demands of the next decade

Only one-third of CEO respondents (global 34%, Asia-Pacific 32%) believe the C-suite model is well-suited to the demands and opportunities of the next decade. Among board directors, those in Asia-Pacific are most sceptical of the current C-suite model, with just 24% (global 35%) believing that it is well-suited to meet the challenges 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 global CEOs (Asia-Pacific 69%) expecting to add positions or change roles on the C-suite and 82% of global boards (Asia-Pacific 88%) reporting the same. The top five new C-suite capabilities critical to company’s continued growth according to CEOs are: digital transformation (global 55%, Asia-Pacific 68%); innovation (global 53%, Asia-Pacific 52%); artificial intelligence (global 43%, Asia-Pacific 47%); data science (global 33%, Asia-Pacific 37%); and behavioural science (global 25%, Asia-Pacific 23%).  

EY Asia-Pacific Area Managing Partner Patrick Winter said: “The trend in Asia-Pacific is clear: institutional investors increasingly expect corporations to address global challenges. This region is rapidly becoming the heart of global innovation, and as this survey demonstrates, Asia-Pacific CEOs, investors and boards are already leading the way in embracing technology and digital transformation, while challenging the status-quo of standing business conventions.”


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