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Diplomacy in Action

What Keeps CEOs Up at Night and What Are Their Top Priorities?

Jon Spector, President and CEO of the Conference Board
New York, NY
February 24, 2015

12:00 P.M. EDT
Date: 02/24/2015 Description: Jon Spector - State Dept Image
MODERATOR: All right. Good afternoon, everybody. Thank you for coming. We are very happy to have back with us today in our briefing room Jon Spector, president and CEO of the Conference Board, who will talk with us about the Conference Board’s annual survey of CEOs, the CEO Challenge. We are, of course, on the record, and in the question and answer period, please state your name and wait for the microphone, and please follow us on Twitter and like us on Facebook. With that, Jon Spector.
MR. SPECTOR: Thank you. Good afternoon, everybody. It’s a pleasure to be here. I guess I have this on the computer. Am I controlling this? Yes, I am. Okay. It’s a pleasure to come talk to you today about one of our major pieces of research. Every January, February we release a survey of the world’s CEOs and we basically ask them two questions. It’s a very simple survey. I’m simplifying just a bit, but we basically ask them two questions: What keeps you awake at night, what are your biggest challenges? And what do you plan to do about it?
And this year we had about – every year we typically have about 1,000 CEOs who respond to our survey. You can see here the breakdown by region. About 25 percent from the U.S.; 14 percent from Europe; 25 percent – I guess I need my glasses – 25 percent – sorry, 35 percent from Asia. And you can see the breakdown in color in terms of companies that are small, medium, and large. And this is close to an approximation of the global economy. Europe is a little underrepresented, but other than that, in terms of size of company and so forth, it’s reasonably representative of the global economy. And when you have a thousand companies across all industries and all geographies, I think we get a pretty good sense of what the leaders of the business community around the world are thinking and what they’re answering to these two basic questions.
Now, I’m going to present a series of PowerPoint slides to you. We’re going to have copies of the slides available afterwards. If you’d prefer electronic copies, that’s not a problem. You can get those. You can also get a in-depth report on the CEO Challenge on the Conference Board’s website – it’s And part of our mission at the Conference Board – our mission is to help our member companies improve their performance, but also help them better serve society. There are about 1,100 corporations and other kinds of organizations that are part of the Conference Board, and as part of our societal mission, we publish a lot of our research and make it available free to the public, so this study is one of those. You can get the full study on the website. We also publish things like the U.S. Consumer Confidence Index and other economic data. For those of you that are keeping up with today’s news, at 10 o’clock this morning we just announced that consumer confidence has gone down pretty significantly, although it is continuing – it is generally on an upward trend. So in any event, that kind of gives you a quick overview of the Conference Board.
So the survey is representative of CEOs around the world, about a thousand of them. And we do this, I have to say, in partnership with about 15 organizations, principally in Asia but also in Europe and elsewhere, who help us to engage with senior executives and so forth.
So feel free to interrupt, but I’m also going to take questions at the end, and I’ll try to take about 20 minutes to go through these about 15 or 20 slides, and then we’ll have a good time for Q&A. But if you do have questions, feel free to interrupt.
These are the 10 most critical challenges faced by CEOs in 2015: human capital, talent, is the greatest challenge; innovation; customer relationships; operational excellence, efficiency; sustainability; corporate brand and reputation; government regulation; political and economic risk; international expansion; and trust in business. And let me show you how these have changed over the years. There are more – most are stable, but some changes have taken place, and I think the changes are important and relevant to understand.
The first is that human capital remains at or near the top of the list for CEOs. And for those of you that are business people yourselves as well as journalists, this is not at all a surprising conclusion. People – whether your business is manufacturing chips in a fab plant or whether you are a management consulting firm where your only asset is your people, the people make the business. And we did see a dip in human capital prior – just prior to this slide. So in 2010 and ’9 we did see human capital fall down the list. Do you remember, Gad, what it was, maybe fifth or sixth? Is that possible? Somewhere down to the middle of the list. Which was – and particularly in the United States. And what we felt was that during the height of an economic crisis that CEOs could afford, perhaps, to not focus so much on their people because they had really corporate survival at stake; they had to cut costs, they had to do lots of things.
And what we said at the time was that we can probably, as an economy, as a national economy in this case, because it was – the ranking was particularly low in the U.S., we said we can survive as a competitive economy for a couple of years without human capital being at the top of the list, but if it doesn’t rise back to the top of the list pretty soon, then we really have something to worry about. And fortunately, it did. And so it’s now solidly ensconced – most CEOs think this is their number one challenge, and it remains that way.
Customer relationships are becoming much more important. And again, I think you can see a little bit of the tail end of the financial crisis here. In 2011 and ’12, we’re still not fully recovered and things were more important, perhaps – not that customers weren’t important, but they weren’t the most important thing. Now they’re back near the top of the list.
Government regulation is less of a concern, and I’m going to show you how this differs later by region in the world. It’s pretty interesting. But on average, government regulation is less of a concern. Now, I know that this particular week with the news, whether it’s the Ukraine or the shutdown of the funding of U.S. budget or whatever the issue happens to be this week, in addition to government regulation, global, political, and economic risk is also dropping.
This is a very, very important finding, because I think it’s easy – so for example, consumer confidence this morning dropped, and we were just talking on the way over, maybe that’s because of this unsettling situation with the – in the U.S – this is U.S. consumer confidence dropped – because of the Department of Homeland Security and the budget and we only have a few more days. And Gad then reminded us that in 2011 consumer confidence also dropped significantly when the government shut down, but that was after the government shut down. And if you remember the press coverage in 2011, it was much more extensive about the – because it was a whole government shutdown. It wasn’t just the shutdown of one department.
So I think that it’s still in all of our minds as individuals that political and economic risk is really front and center with the things that are going on in the world. As a businessperson, I worry about it for our own organization. How resilient can we be? What happens if Greece pulls out of the euro? What does that do to our revenues in Europe and to our activities and so forth around the world?
But CEOs are very aware of all this, but they’re not fundamental – they’re pressing ahead, either because they don’t think they have a choice or because they’ve gotten used to operating in a very volatile world, or they see opportunities balancing these risks and they feel nimble enough to be able to point their companies towards those opportunities. So if something is going on in the Ukraine, well maybe we’ll focus on India – which is now, by the way, growing faster than China. And if something happens in India, then maybe we can focus on Indonesia, or maybe Brazil will be coming back. So the economy is – so I think that’s a very important conclusion, that CEOs are not being dominated so much by things they can’t control – government regulation and global, political, economic risk. That’s actually a very healthy sign for the global economy.
So those are the survey results technically, and again, you can look in more detail. There’s the numbers behind that and all of that in the document on our website. It’s a long report.
I want to talk to you about 12 big-picture trends that we observe coming from this data and also coming from the interviews that we conduct with CEOs as part of this survey. We send them the survey, but then we talk to them and follow up and ask them to provide some additional color. So I’m going to read to you just the 12, and then I’m going to go through each one, and then that will be the presentation.
So number one: taking the offensive against slowing global growth.
Number two: focusing on controlling the controllable and not worrying so much about the uncontrollable, as we just mentioned.
Third: strengthening human capital – we saw that as the number one challenge – through a grow-your-own strategy. In other words, focusing on the people we have, not on the people we need to get.
Four: building a stronger relationship with customers to build market share.
Five: putting a greater emphasis on sustainability. Everywhere, I have to say, and I’ll show you this, except for the United States, which, as an American, is troubling. But everywhere else, putting a greater emphasis on sustainability.
Number six: pursuing what I’m going to call a nontechnical approach to innovation. There’s a lot of discussion about innovation and people immediately think high tech. When we look at what CEOs are doing to build innovation, it’s very, very low tech, and it’s very interesting.
Seventh: seeking to rebuild trust. And the important point here is below the radar. It’s not very visible, but we think CEOs are working on this.
Eight: a surprising lack of emphasis on cross-cultural competency. CEOs basically are saying this isn’t very important. And what we’re hearing from other people in the organizations who are members of the Conference Board is that it’s extremely important. And so we are wondering whether there’s a disconnect at the C-Suite with the rest of the organization.
Nine: an increasing comfort with big data, but not – no clarity yet on what to do with it. So you’ll see that CEOs aren’t losing sleep over big data anymore – they don’t rank it as highly. But they’re also not sure what to do about it.
Number ten: CEOs face different challenges in different regions. There are some common elements, like human capital being number one. It’s number one or number two, I think, in every region in the world. But there are some pretty interesting differences, and I’ll show you what those are.
Number eleven: expecting new challenges to emerge. So while I’ve listed these ten major challenges, I want to show you the list of what the next challenges – excuse me – at least as CEOs see them coming down the road.
And lastly, to point out the fact that CEOs seem very – they expect a lot of themselves. They’re not looking at this list of challenges and saying, “Well, these are the problems that I see; you fix them.” They understand the important role that leaders have to play, and they take these challenges on as their own. And I think that’s just an important – to understand the mindset of the CEO.
So these are the twelve big-picture trends. Let me just quickly step through each one, and then I will take questions. And again, feel free to interrupt. Any questions or clarifications so far, let me just briefly ask? We okay? Yeah.
QUESTION: About sustainability and (inaudible). Sure, thank you. My name is Kahraman Haliscelik. I’m with Turkey’s national public broadcaster, TRT. One day our thinking about innovation or about sustainability – you said that they’re not thinking about technical part.
QUESTION: What are they thinking about?
MR. SPECTOR: Organizational capability. And I’ll show you exactly what they’re thinking about. They’re thinking about ten things, and nine of – one of them is technical, and nine of them are organizational, about people. And I’ll show you exactly what list is.
Any other questions so far, just a quick – okay. All right, I’ll keep going.
All right. So let’s start with number one, taking the offensive against slowing global growth. So we ask a few questions in addition to the ones that I said. It’s not a very long survey. But one of the questions we ask is: What are you expecting in terms of profitability over the next year? Seventy-five percent of CEOs expect either moderate or substantial improvement in profits over the coming year. That is a very positive sign. It’s a positive sign at two levels. One is CEOs are decent predictors of outcomes. They’re not great, but they’re not terrible. They’re decent predictors of outcomes. More importantly, they are better predictors of investment. Not surprisingly, if you as a CEO believe things are going to improve, you’re more likely to make a decision to invest. And we track CEO confidence at the Conference Board and invest – capital investment, and we find that CEO confidence is a leading indicator of investment. So the fact that CEOs are optimistic about profits is a good sign in terms of future corporate investment.
We also look at the strategies that CEOs are taking to achieve their profitability. And fewer and fewer of them this year are about cutting costs and more and more of them are about improving productivity – so things at the bottom of the page, like business process redesign; new – these are the strategies that CEOs say are important to improving profitability. Improving workforce skills, leadership skills; deepening employee engagement; building brand and reputation; developing an innovative culture, which is one of the ten, by the way, of things that they’re doing to foster innovation.
So this is different from what we saw four or five years ago, when the strategies to either protect the financial base or the economic performance had to do much more with efficiency and operational effectiveness. Now it’s really taking the offense rather than having to play defense against risk and government regulation and non-growing markets. So that’s point number one.
Number two: Focus on controlling the controllable. Again, as I’ve said, less emphasis on externalities like global, political, and economic risk, and less emphasis on government regulation. And so again, the kinds of strategies that CEOs are planning to take are much more things that they can control – building human capital (inaudible), expanding workforce skills. Although they don’t have complete control over that, there’s a big workforce supply issue that we’ll leave out for today’s discussion. But they can certainly work on it internally. Improving leadership development – we see these same sorts of strategies earlier.
So focus on controlling the controllable. And I think if I step way back and say from 2007 to 2015 has been a very interesting huge decline, and now a recovery, I think it really has taught everyone to be more resilient, to be more comfortable with volatility, and to focus on controlling the controllable. I mean, if you – even if you’re a financial institution or a non-financial institution, during the height of the economic crisis you just couldn’t control what was happening. And you still have to go to work every day and you still have to lead your organization. So I think CEOs have developed a new skillset – not a new skillset, but they’ve strengthened that part of their skillset, and it’s resulted in controlling the controllable. And I think that’s why you see for the most part, most CEOs are kind of cautiously optimistic about the global economy. That’s point number two.
Point number three: Strengthening human capital through a grow-your-own strategy. What do we mean by “grow your own?” We mean building the capabilities of the people you already have. These are the ten highest-ranked strategies for how CEOs are planning to strengthen human capital, which was their number one challenge. Nine-and-a-half of them are focused on their own people. The only point in red there, it says “to attract.” So improve performance is focused on external people. So improve performance management and accountability – that’s internal. Provide employee training – that’s internal. Enhance the effectiveness of our senior management team – internal. Raising employee engagement, and so on. Retain critical talent. Improve succession planning. All internal. The only one that even touches on external factors is improve corporate brand and employee value proposition to attract or retain top talent.
This is a very surprising focus inward on our own people, and it may explain why job growth is somewhat slower than people might expect, at least here in the U.S. Gad, I – Gad is – let me introduce my colleague, by the way, Gad Levanon. Gad is a senior economist at the Conference Board and runs our labor markets program. He’s also a person – I was joking to – not really joking to my colleagues here that if you have really detailed follow-up questions, you certainly aren’t going to ask the CEO of the organization. You need to follow up with Gad.
But Gad, is this, perhaps, is this, do you think, related to why – if companies are growing, are seeing growth but focused internally on their people, could that lead to a somewhat less than robust recovery in the job market?
MR. LEVANON: I think that may be one reason why labor turnover is not as strong as it was in pre-recession, for example. So I think there are less people quitting their jobs. So that may be a result of that.
MR. SPECTOR: So I think this is – again, there are two ways to strengthen human capital: with the people you have or the people that you’re trying to attract. And there’s a very clear emphasis focusing on the people that you have.
Number four, I’m not going to spend a lot of time on this, but we see through the strategies and also through the direct interviews with CEOs that focusing on customers is a much more prominent part of CEOs’ mindset and strategy. I think this is all part of the “it’s time for us to play offense, not defense.” And at this point, I think it is a – if it wasn’t in 2005, if it wasn’t well understood that being customer-centric was critical in every business, certainly now in 2015 with all of us holding our devices and being able to rate companies and services and rate each other, the power of the communications gives to customers is certainly understood by just about everybody. And I think that’s what’s driving point number four. Even though customers were incredibly important pre-crisis, I think they’re even more important now.
Number five is putting a greater emphasis on sustainability. So we see that it has risen in the last – recently risen; it’s really jumped up to number five. It was rated sort of eight through ten in the past. And this was actually quite confusing to us in 2013 and 2014. Why was it ranked so low? And I really just think it’s a matter of momentum. I think in the last 24 to 36 months, sustainability has been such a big issue in the – societally, in the government, and for business leaders. And now I think most companies are – understand that sustainability is an important part of their value proposition to their employees, it’s an important part of their value proposition to their customers, and it’s also a social obligation.
Now, we’re not seeing commitments in terms of actions, in terms of the strategies that CEOs are taking to do things like actually reduce their carbon footprint or use of scarce resources. We’re seeing more commitments to report, to make it a corporate priority, to manage, to limit the growth, but not yet an aggressive commitment to reduce usage of resources. And that may be – may suggest that this issue is going to stay high on people’s list of challenges, because it’s not going to be solved just by reporting and slowing the growth.
Number six – and this gets to your question – pursuing a non-technical approach to innovation. So remember, we asked two questions – what keeps you awake at night, and what do you plan to do about it? This is the question of – if you say, as a CEO, “Innovation is one of my critical challenges,” we then say, “What do you plan to do about innovation in your company?” And here are the ten most important, most frequent responses of CEOs. How do you build innovation?
Nine of them, everything but that red one, is completely about people and organization. The fourth one, apply new technologies – okay, that’s technical. That’s technology. But look at the rest of them – create a culture of innovation is number one. Engage in strategic alliances. Find, engage, and incentivize key talent. Adopt a user-centric approach to innovation. Again, customer centricity. And there’s another one here – pursue open innovation concepts; in other words, open up your product development process to customers, even to outsiders, particularly customers, and help them – let them help you co-develop products.
Now that doesn’t mean that the objective of these strategies isn’t technology. I mean, there could – you could be – if you’re a technology company, innovation is going to be about technology. But the real business challenge, what CEOs are focused on, isn’t designing the chip, it’s creating the organization of people who can design the chip, if you’re in the chip business. On the other hand, if you’re in the grocery business, you also need to be innovative and you also need to build a culture of innovation and an organization of innovation, and the end result, of course, is about food – or actually, maybe it is technology. I’m not – I guess there’s technology in the grocery business too; how do you keep food cold and all that stuff.
But what – CEOs aren’t worried about the technology. They’re worried about the organization, and I think that’s important as we – because everything we read in the press is all about innovation connected to technology and the CEOs are thinking about it differently.
Number seven, seek to be – rebuild trust, sometimes below the radar. I don’t know if you remember back to the slide, trust in business is the lowest ranked challenge and it has been since we began asking the question maybe three years ago. It comes in 10th out of 10 every time. Now I have yet to talk to a CEO in – and I have had explicit discussions with a number of CEOs in the U.S., Europe, and Asia, and every single one of them thinks that trust – that the lack of trust in business is a big issue. So why are they ranking it 10th? (Laughter.) At least they could rank it 9th. Why are they ranking it 10th? And I think we think that the answer is that CEOs don’t see how to build trust in business outside of their corporate walls. They don’t see a way to engage with society as a group to say you – here’s how you can trust in us. What they instead see is we – my company needs to behave in a trustworthy way. And they’re trying to do things inside the walls of their company to make their employees understand, maybe to make their customers understand that they’re ethical and that they’re adopting behavior. And there are lots of CEOs and lots of companies that are trying to take steps in that direction.
Now, I’d just make a quick comment – I personally don’t think it’s having much of an effect on the public. And I think one of the very fundamental quandaries for CEOs is that they are seeking to rebuild trust, they think it’s important, they are doing it below the radar, and it isn’t working, and that’s where we are today, in my view. That’s my personal opinion; the survey doesn’t sort of show that.
QUESTION: (Off-mike.) Sure. My name is Kahraman again, with Turkish television. Now is that reversing the trust between the public and the companies? Because the perception among the public is that they actually don’t trust the corporations – the cases we see, Occupy Wall Street and all other ones.
MR. SPECTOR: No, it is not. That’s my point. It is not reversing that trend.
This is a very significant disconnect – disconnect is the wrong word – conundrum. It’s a very hard issue to solve. I mean, I sit with CEOs and some of them have said, “Well, what would you want us to do?” And I don’t have an answer to that. Trust me, what do you do as a – it’s very difficult to figure out what to do. I think CEOs are doing what they can do and what they think will have an impact. I was just at a conference yesterday of CEOs talking about this exact issue, and the kinds of steps that CEOs are taking to build trust inside their company among employees, among their customers, are really quite extraordinary. I mean, there’s example after example of companies that are really doing good things that are also turn out to help their business. Pepsi is a great example; Chobani Yogurt is a fantastic example. And there are dozens of examples.
And you listen to the CEOs talk and they’re talking about what they’re doing with great pride and they’re talking about it in the context of understanding the need to rebuild trust. Yet if you look at across society they’re not – they’re – collectively they’re not rebuilding trust. So it’s an issue about collective performance, and there’s no obvious answer. I think all this survey does is to describe what’s happening. It doesn’t say what the solution is, so I think it’s a very interesting issue.
I’ll keep going, just in the interest of time.
Number eight, a surprising lack of emphasis on cross-cultural competency. This is a sort of a very micro finding. We hear from our members – a lot of members of the conference board have their human resource leaders as part of our organization, part of our meetings, and our research. We do a lot of research in the human capital space, and so we hear from a lot of them how important it is for – given how global the economy is, how critical it is to have a global mindset, to have a diverse – have diversity of thinking and of backgrounds across every part of the business, yet CEOs rank having a global mindset, improving cross-cultural competency, increasing diversity, as very unimportant factors in driving performance. They put it way down the list, and we’re just sort of surprised by that. I don’t think if you said to a CEO, “Is diversity important?” they would say “No,” they would say “Of course, it’s important.” But when push comes to shove they think other things are more important. I think it’s just an interesting observation.
Number nine, increasing comfort with big data but uncertainty about how to use it. Last year, we asked one additional question. Forget about the list we gave you, what keeps you awake at night? Anything? What’s your hot-button issue? And last year big data was number two or number one. Number one. This year it’s number 10.
Now that would – and what that – and we’ve had a lot of discussions with CEOs who basically say we don’t know what to do about big data. I think last year they were saying we don’t know what big data is, and so at I think at this point they’ve begun initiatives to tackle it. They haven’t resolved those initiatives yet. So it’s moving down the hot button list, but it’s still very important.
Okay, 10: CEOS face different challenges in different regions. Now many of these CEOS are operating across regions, so we’re picking the region which is the headquarters region where the CEO is usually based. Human capital, number one or number two across the board. And what I’ve done here is the green circles with a couple of mistakes – I’ll point those out – the green circles are where a rating is particularly high and the red circles is rating – is sort of unusually low. Innovation, right? Number one for Asia. Very high for everybody. It’s lower for India – a little worrisome, although they seem to be doing very well this year. Customer relationships, very important in the U.S. and Europe, and less so – a little bit less so in India and China. Sort of interesting. Sustainability, three and four in China and India – is that 40 percent of the world’s population roughly – 35 percent? Number nine and 10 in the U.S. and Europe. That’s where it averages out to number five, but there’s a huge difference between Asia and the U.S. and Europe. And again, as an American, I think that’s somewhat disappointing. Government regulation, less worrisome in Asia, less worrisome in China, and inexplicably, in my view, less worrisome in Europe. That – I mean, I can’t – I have no explanation for that result. Maybe so I know this is two Europeans at this table. I’m sure there are some others here. If you can explain to me whey CEOs are not worried about government regulation in Europe, you’ll take some time to convince me. The U.S. is lower, despite all the stuff you read in the press. I think the business community has mostly adapted. So some common elements, right? Trust in business is very low, at the bottom. Political, economic risk is sort of two-thirds down the way. Human capital and innovation for the most part very high up. So some common elements but some differences.
Number 11: New challenges emerging. So this is again the question of what are the hot button issues you see immediately? You see big data analytics is number 10; what are the most important ones? Changes in customer behavior. This isn’t about human behavior, this is about how technology and changing markets and so forth are changing the way everybody behaves. New competitors globally. We’ve been saying that the economy is becoming a global economy for 35 or 40 years, but now it’s really becoming a global economy.
Slowing economic growth in emerging markets. For many people, many countries in particular, this is very important. You mentioned – the gentleman from Uruguay – China is now your largest trading partner and they’re very – or one of the large ones, and it’s very large for Brazil, as well, and other economies in South America and so forth. The – these are very significant. The slowdown in emerging markets, and particularly in China, is a significant challenge.
Cyber security, number four, and the others – volatility and cash flow, social media, diversity, wage inflation, are some of the other ones that were mentioned. Let me show you something that’s pretty interesting. I’ve looked at those lists of hot-button issues and seen where they differ by region. And I want to point out something that is very, very troubling: Number four – cyber security – United States, two; Europe, three; everybody else, 15-20. And that – again, I can’t explain that, but it – frankly, it is – from a business environment point of view it is quite troubling, because the business community to some degree is integrated. I mean, if you’re a Turkish company and I’m – you’re a bank and I’m a bank, our systems to some degree touch each other. If I’m worried about cyber security and you’re not, that puts both of us at risk. And so I hope – at least personally I hope that this issue moves up the list next year and that companies – this is just a matter of a short period of time before companies recognize this. It’s a very, very serious issue.
QUESTION: What is this T?
MR. SPECTOR: It means tied for 9th. So there’s two nines in that – if you had all the data there, there would be two nines.
Wage inflation. We’re seeing in the U.S. and Europe that that is less of an issue. In the rest of the world it’s more of an issue. Gad – for those of you that are particularly interested in that issue, we’ve just published a global report which I’ll give you – the upshot of it is from too many jobs to too many – sorry, from too – what’s the title? How do you – I’m getting it wrong.
QUESTION: From Not Enough Jobs to Not Enough Workers.
MR. SPECTOR: Yeah. The coming labor shortages around the world, including this year – starting this year in the United States – already started in Canada and Germany and a couple of other places, and we lay out over the next few years which companies are going to start to fall into labor shortage situations. The U.S. and Europe should be more worried – should be much more worried about wage inflation than they are. In this survey next year they will be, because we’re going to be seeing – certainly within two years, and we’re predicting within one year in the U.S. and Europe and in many places in Europe they will see – not everywhere, but in many places, they’ll see this concern as well.
And then lastly, something really about the nature of being a CEO and what they’re sort of thinking. This isn’t a survey result as much as it comes from the discussions that we had with individual CEOs after they answered the survey. The CEOs, as I said, they take these problems on themselves. They think – some of their strategies to deal with them are to get a personal firsthand understanding of the issue. That’s actually a strategy that many CEOs say, “In this particular area, I need to understand more about what’s going on here.” They also talk about changes in organizational culture, and they understand that those changes need to start at the top and the importance of them and their senior team being role models.
So I think that sort of sums it up. These are the 12 trends. As I said, the data – more detailed data and so forth is available on the website. And I’m happy to take questions or comments.
QUESTION: Hi. My name’s Momoe Ban. I’m a reporter of Nikkei, a Japanese newspaper. Did you get the result of those trends in terms of each industry of CEO?
MR. SPECTOR: No, we have a good mix of industries, but we don’t have these big picture trends by industry. There is some industry data in the report, but it’s not at the level of granularity of these 12 trends. So you can see – so I encourage you to go to the website and download the report. There will be some – some – industry data. It gets very difficult. If you want to sort of have Japanese media companies or Turkish banks, it gets to be a very small sample. So – but there is some industry data there.
QUESTION: My name is Milka Tadic-Mijovic, and I’m coming from Weekly Monitor from Montenegro. When we are talking about this global political risk, do we have difference between Europe, for example, and United States? And within the regions, I mean?
MR. SPECTOR: Yeah. Let me see. I think they’re pretty similar, but – yeah, if you look here at row 7, there are actually – that’s one of the most similar. Everyone rates it six, seven, or eight, so down in the bottom half. So, again, a little bit about that point I made about government regulation, I could see in Europe you might expect it to be higher.
QUESTION: Because of Ukraine?
MR. SPECTOR: Yeah, and Greece.
QUESTION: And Greece.
MR. SPECTOR: Yeah. This – but I think – I don’t know. But we have a lot of Europeans on our economics team. We have an economics team in Europe, and our chief economist in the U.S. is Dutch, and we have a few others as well. And they seem calmer than I am, as someone who’s not really knowledgeable about the region. I know Gad, you’re Israeli. I’m not sure, is that part of Europe or Asia? But the people who are from there, who are in the Conference Board and who study the economy, the two intersecting, seem to be a little bit – just a little bit calmer. Is that a right – correct? I mean, is that a correct observation about our team?
MR. LEVANON: Yeah. I think part of it is that Europeans are very committed to the European idea of the European Union and the euro. So they are more likely to believe that it will stay intact, I think, so they’re – that I think makes them more comfortable.
QUESTION: Excuse me. When did you make this survey? Before the Greece – changes in the Greece or after?
MR. SPECTOR: Well, I guess sort of during. I think the survey results were probably October and – mostly October and November, so I mean before the immediate crisis these past few weeks, but not before the issues were coming – were rising. And then Ukraine was an issue at that point, so --
QUESTION: But I see still – just in addition to my colleague’s question, could you deeply explain the low position of global political economical risk? I’m Alexey Osipov from Russian (inaudible). So ISIS is already well known in 2014.
QUESTION: And global, political, and economical risk are so low position. It’s kind of the paradox or phenomenon.
MR. SPECTOR: Yeah, it’s interesting. I don’t really know. But I give you one hypothesis, which is that CEOs don’t think of ISIS in that category of global, political, and economic risk.
QUESTION: It’s not (inaudible), it’s terrorists.
MR. SPECTOR: Yes. No, no. And I don’t think we asked about that. You see what I mean? I think they – when I’ve heard CEO – when I’ve been in discussions with CEOs about these kinds of challenges, terrorism is sort of over here. This list of things is over here. That doesn’t mean it’s very unimportant. In fact, it may be very important. But I don’t think that our survey, to be honest, was a good indication – it was not a good measure of how important I think it is. I think it is not a measure. I don’t know what – I think we may need to consider asking about it next year. But I don’t think – so I don’t think it’s an error. I think it’s not looking at it, if that’s a fair point.
QUESTION: Hello. Argemino Barro from Spain, Capital Radio. Did you study the media? Because maybe the way the CEOs in Europe – I mean, the United States perceive reality is because in the United States maybe the media are a bit more (inaudible) regarding Greece is going to exit the euro, Ukraine on the brink of collapse, and maybe in Europe they read different media.
MR. SPECTOR: We did not. We did not study it. But who is the – I was having a discussion from Italy, right, and we were talking about how the U.S. press portrays the Italian political and business situation. And you were making the point that perhaps the U.S. press overdoes the drama a bit.
QUESTION: Yeah. There’s a lot of drama in the way it’s presented to the American public.
MR. SPECTOR: Yeah. And I think that that’s probably right. So I would be very surprised if the media did not have an influence in each of these places. I lived in Hong Kong and Taiwan for six years, and the media there portrays different countries differently also, so – but we did not study it, no.
QUESTION: Thank you. Kahraman Haliscelik again with Turkish Television. Now is – I’m curious about whether there is a conversation among the CEOs about some of these challenges, some of these issues. What are they talking to – what are they talking when they’re speaking to each other? And do they share these with you?
MR. SPECTOR: Yeah. Absolutely there is a conversation. And let me just go back to, say, just the very first list. And I don’t want to claim that the Conference Board, by any means, is the only forum in which these issues are discussed. There are many, many forums of CEOs. In fact, CEOs probably put – one of the things that keep them awake at night, why they get so many invitations to things like the Conference Board and all of these other places that convene CEOs, it’s really quite incredible.
There is an enormous, an enormous disconnect – I mean, almost a complete disconnect – between the way CEOs talk about business and society and the way society views CEOs thinking about business and society. And it is – I think – the disconnect has, I think, gotten to the point where it actually is a small threat to the economy. It comes back to this point about trust in business. And I think – to be honest, I think that CEOs – I mean, there are obviously some percentage – I think it’s small – of CEOs who are not – who don’t care about society, who don’t care about these issues, who don’t care about their people. I don’t think that percentage is any higher or lower than it is among journalists or among economists or any other segment. Most CEOs care a lot about these issues. They care about sustainability. They care about customers. They care about employees. They care about political risk. They care about all these things. And they’re perceived to not care about it at all.
So they talk about it all the time. They don’t complain about the lack of understanding. I think that may be one difference, because at the CEO level, they’re pretty focused on doing things, and so they don’t spend a lot of time saying, “Oh, we’re so misunderstood.” In fact, they spend no time on that. They just basically say, “This is what we’re doing. Here’s our program for improving the -- ” Pepsi talks about – I’ll pick on Pepsi, please don’t mention – if that part can be off the record, because we’re not a – I mean, Pepsi is a member of the Conference Board. Coke is a member of the Conference Board. We don’t want to play favorites. But when you hear Indra Nooyi, who is the CEO of Pepsi, talking about how Pepsi is trying to clean up the water around the world and so forth, it’s inspiring. And she really cares about it. She grew up not having access to water. She grew up in India. And the town she had – she didn’t have – she said she had water two hours a day. She cares about it. She cares about it more than we care about it. But if you ask people, “Is Pepsi a good corporate citizen,” I’m sure that 80 percent of the people would say no, the same way they would say that the Conference Board isn’t a good corporate citizen, or Coke, or whoever else.
So it’s a huge disconnect. The CEOs do talk about it, but they don’t wring their hands about it. They say this is what we’re doing. We try to make – and they learn from each other. “Oh, that’s interesting. That’s what P&G is doing about water. Huh, maybe we should do that.” So they’re very focused. They’re very business-like, if you will.
But it is a big disconnect. And it’s something, by the way, that the Conference Board is – we have an initiative, a small initiative, on trust in business to try to think through this disconnect and what does it mean for business. Is it a risk to businesses? Is it a risk to the economy? And we’re a little bit concerned about that.
Other questions? Yeah.
QUESTION: Yeah. I would like to ask if it is possible to identify a sector that is like a reference for the rest of the world in terms – for example, if you might have capital? I’m thinking of Silicon Valley. There are always news with new ways of treating workers and healthy food and stuff.
QUESTION: Is there a reference in the world for other CEOs?
MR. SPECTOR: Well, it’s interesting that you mentioned Silicon Valley. I think there are some people – there’s a reasonably sized movement to think that actually the people processes in Silicon Valley are very poor, and that the – that they are intended to make people only work, like we’ll feed you dinner and we’ll let you get your dry cleaning, right? I mean, like you never have to leave the office. And that sounds good until you realize if you actually never leave the office, it’s actually bad. By the way, my son works for Google, so – I mean, and he gets the free dinners and stuff and he loves it, so I’m not saying that it’s a bad thing.
But it’s not – so I think the short – I’m saying that because I think the answer to your question is no. I don’t think there are sectors that are examples. I think there are companies that are examples in certain areas. So we have an institute for – on that specific point, we have – I’ll just point you again to our website. We have an institute on employee engagement where we have a hundred companies that get together to share best practices about employee engagement. And there are companies that are better at that, and there are companies that are worse at it. But they talk about the best practices and they all share and learn from each other. So there are some companies that I think are very good at that, but not – I don’t think sectors – banks are good or bad or technology companies are good or bad. I think it’s much more about the leadership and the culture and the people inside a company, not inside a sector. That would be my guess.
Other questions? Yes.
QUESTION: Do you reward somehow the CEOs for participation in survey?
QUESTION: Reward, reward. Do you --
QUESTION: Not to pay, I mean.
MR. SPECTOR: No, no, no.
QUESTION: Any benefits?
MR. SPECTOR: No. We write them a letter of thank you, I think. No, we don’t – no, it’s a voluntary --
QUESTION: Yeah. But maybe you have promised to advertise (inaudible) companies.
MR. SPECTOR: Oh, no, no no. No, no, no. We’re – the Conference Board is – we are a not-for-profit organization and we’re also a non-advocacy organization. So we don’t – we’re not allowed to – our members are all competitors with each other, so it’s all the banks and all the insurance companies and all the airlines and all the beverage companies and so forth. So we can’t – if we favored – if we said this is better than that, we would go out of business pretty quickly. (Laughter.) So no, it’s --
QUESTION: Orhan Akkurt from Turkish news agency. My question is about government regulation. As I understand, the regular government regulation is higher in United States than Asia, right?
MR. SPECTOR: The concern about it is, yes.
QUESTION: Concern about it?
MR. SPECTOR: Yes. Let me go – let me just make sure. In the U.S., it is five. And in Asia, it is nine and ten. Yeah.
QUESTION: Yeah, it’s – yeah. What do you comment on that? I mean, why the American CEO is more considering – worries about the government regulation than Asia?
MR. SPECTOR: Well, I think – I would say that the regulatory environment in the United States has evolved to – despite the fact that business leaders would complain about this, it has actually, I think, evolved to a very sophisticated level, which means that it’s quite intrusive. In other words, the regulations are regulating very small specific things because we’ve been regulating for a very long period of time, and regulations tend to get more specific over time and they get to get more detailed over time.
I think – I guess what I’m saying is I think it’s frankly a simple matter of a stage of economic development, and that’s why I can’t explain Europe being so – being low. I think that the regulatory environment in the U.S. is sophisticated and detailed and somewhat intrusive, and I think that the regulatory environments in Asia – I’m leaving out Japan and perhaps Korea, but in China and India – are less sophisticated and perhaps less enforced.
I mean, I can tell you this from my own personal experience. When I was living in Taiwan, I remember Taiwan had very extensive environmental regulations patterned, actually, after the U.S., and in many cases tighter than the U.S., but much, much weaker enforcement. And so pollution was worse in Taiwan than it was in the U.S. This is 20 years ago – might not be true. But I think – so I think that – I think it’s really the level of sophistication and development. And therefore, I would expect over time that if the economies of China and India continue to develop in kind of a free-market direction, I would expect the government regulation there would become more specific and more targeted as well.
MODERATOR: Sorry. You had one more question here.
MODERATOR: Is it a follow-up?
QUESTION: No, no, it’s --
QUESTION: No. Go ahead, ma’am.
QUESTION: Because it’s another argument.
QUESTION: It’s another topic. Okay.
MR. SPECTOR: Well, I’m not having any arguments. (Laughter.)
QUESTION: No, no, no. (Laughter.) So going back to – I’m Chiara Basso, Il Secolo XIX, Italian newspaper. Going back to the sustainability that is more and more important, and the disconnection of perception between CEO and society, I think it’s not so difficult to understand why, when there are CEOs or there are, let’s say, good CEO like Pepsi who say yes, I want water for everybody, and then on the other side, you have other CEO like Nestle CEO who say – that says water is not a human right. We know as journalists that bad news get more attention than good news.
So does bad CEOs attract more attention than the good CEOs and make news? So why don’t you create a paper or a – I don’t know – a document about sustainability and about what companies should do, and then let them subscribe? But the companies that really follow those guidelines about sustainability – that would be a more – no? – good effort.
MR. SPECTOR: Yeah. Well, there – well, yeah. There are actually organizations that do that. We – without getting too involved in the Conference Board’s own approach, we are very averse to rankings, again, because everyone is a member of the Conference Board. And so if we have rankings that are at the top, that also means we have rankings at the bottom. And we would much rather publish this sort of research and raise issues and be a place where people can come together to debate.
But there are many other organizations, that are very reputable organizations, who do exactly what you’ve just said. And there are, at least in the United States – actually, I would direct you – maybe Gad – if you want to find out about these, we have in our governance center – in our corporate leadership area, we have researchers who know what all of those indexes are. We don’t publish them, but we use them, and they are publicly available. So they do publish companies that are on – specifically on sustainability, companies that are performing the best and companies that are performing poorly, fact-based information that would explain that. That will, by the way, never trump a CEO saying water is not a human right. That --
QUESTION: No, it’s – but it’s not about ranking. It’s just about --
MR. SPECTOR: Right. Well, best practices.
QUESTION: -- I mean, I am a company that adheres to these ideas and I’m subscribed, that’s it. Not making a ranking about the best or worst company.
MR. SPECTOR: Oh, yes. You mean commitment, so to speak.
MR. SPECTOR: Yeah. No, there are those. There are organizations that are focused just on sustainability that do that. And our research folks can point you in that direction. I don’t remember their names, but there are organizations that are already doing that, so – okay.
The last question?
QUESTION: Yeah. Do you have – I mean, all this – those CEOs were profit organization or nonprofit organization as well?
MR. SPECTOR: I think they’re all for – that’s a very good question. We’ve never been asked that. I’ve never been asked that. Ralph, do you know, or Gad? I think it’s all for profit, but --
MR. SPECTOR: It’s certainly mostly for profit.
QUESTION: For profit?
MR. SPECTOR: For profit.
QUESTION: Okay. Yeah.
QUESTION: As – you are nonprofit organization CEO right?
QUESTION: Okay. What is your challenge and what is your top priority as a CEO?
MR. SPECTOR: What is my – as the Conference Board?
MR. SPECTOR: Let me go to the list. (Laughter.)
QUESTION: What keeps you awake? (Laughter.)
MR. SPECTOR: What keeps me awake at night? (Laughter.) Are we – don’t – haven’t we run out of time? (Laughter.) I have --
QUESTION: Do you sleep all right?
MR. SPECTOR: Yeah. (Laughter.) Oh, I get up sometimes. This list is a pretty – well, I would put number 10 higher, but the top three – actually, the top four are – would be – would probably be – would be the top four for me too: human capital, innovation, customer relationship, and operational excellence. Those four would be – and probably number five would be trust in business. Those would probably be my top five.
QUESTION: Say it again?
MR. SPECTOR: So the top four here, and then trust in business.
QUESTION: And no eight?
MR. SPECTOR: I would – no, not because I’m not worried about it, but because we’re – I mean, we don’t – we’re 300 – we’re so small, we have no – this is one of those things that – focus on what you can control. We have no influence. We’re a small – we have 300 people around the world. If you’re a big, huge company, at least you can lobby; you can engage in the political process and so forth. We’re completely not engaged in that, so I suppose I worry about it, but I don’t do – I don’t spend any time or resources managing it.
But human capital, people, innovation, our – we call it members, not customers – member relationships, operational excellence, and then trust in business. If business – that – we would put that much higher than what other people have put it as. So it’s a good question, though. Thank you for – I wasn’t sent the survey, actually, was I? I don’t think I was. Next year, I need to – so that I can answer the question. (Laughter.)
Okay. Well, thank you to our hosts here at the Foreign Press Center and thank you all for coming. We have the copies of the document if you’d like. We’re happy to send them electronically if you just give us your email address. And the larger – this presentation is not on our website, but – this is a private presentation which you can have, but the full report is on the website. So thank you. (Applause.)