CEO Insights for What's Ahead | 6.15.22
Repeated shocks, geopolitical tensions, and restrictive monetary and fiscal policy decisions raise the specter of global recession. While currently not the most likely outcome, the occurrence of one extreme event—or even a combination of several smaller unfavorable events—could thrust the world back into recession in 2022 or 2023 following the spectacular recovery from the pandemic. ?
Why It Matters From an escalation of the war in Ukraine and deepening food and energy shortages, to aggressive tightening of central bank policy and downturns in key housing markets, multiple scenarios now have the potential to lead the world—and individual economies like the US, EU, and China—into recession within the next 18 months. “Stagflation”—a period of very low growth and high inflation—looms as an even larger risk, one just as undesirable as recession if prolonged. In fact, a short period of stagflation—either globally or in select major economies—now appears more likely than recession over the next year and a half, a possibility that should still worry business executives.
A cyberattack occurs in the United States every 39 seconds—a frequency that is only expected to increase due to the accelerated the use of cloud services and other digital technologies during the pandemic. A new Solutions Brief from The Committee for Economic Development, the public policy center of The Conference Board (CED), underscores that leaders in the public and private sectors must work more closely together to better secure cyberspace. That will mean sharing information, collaborating against accelerating threats, and working in tandem to train a cybersecurity workforce large enough to protect Americans and their data. ?
Why It Matters “Cybersecurity is no longer just an issue for the IT department, but is now a critical responsibility for CEOs, C-suites, and boards in all organizations,” said Dr. Lori Esposito Murray, President of CED. “This responsibility won’t be met effectively without more robust coordination and partnerships between public- and private-sector leaders—spanning major corporations to smaller businesses to the federal government to state and local governments.”
With increasing demands for transparency and disclosure, heightened competition for talent and market share, and increased scrutiny of how companies treat their workers and suppliers, CHROs will need to partner with both C-suite colleagues and the board to shape the corporate narrative around human capital. Indeed, human capital strategy must become a seamless part of the overall business strategy.
Why It Matters “The C-suite needs to think about how to craft the human capital narrative so that it addresses multiple stakeholders through multiple channels. It must attract customers and talent, address the concerns of the communities, investors, and shareholders they serve, and, in time, align with the specific disclosure requirements of regulatory agencies. But striking the right balance across an enterprise will be no easy task,” said Rebecca Ray, Executive Vice President of Human Capital.
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At a recent roundtable discussion with corporate directors and senior executives hosted by The Conference Board, 95 percent of participants said ESG has affected board agendas, over half said it has affected the factors boards consider in making decisions, and nearly a quarter said it changed the outcome of the board’s decisions. But there are still ESG skeptics in board rooms. It’s critically important not to dismiss them, but to listen to their concerns and engage them in a discussion of ESG issues within the context of the company’s strategy—not just to satisfy the demands of stakeholders, but to create enduring value that distinguishes the company from its competitors.
Why It Matters ESG and stakeholder capitalism are not going away. Based on the preliminary results of a survey currently underway, 72 percent of respondents said that ESG is likely to have a significant and durable effect on their board over the next five years—and 55 percent said the same of stakeholder capitalism. For boards to fulfill their roles effectively, they need to have a well-grounded consensus, not just on what ESG issues truly matter, but on the urgency with which the company should approach them.
As trust in other institutions like government and the media have eroded, expectations are rising on companies to play a leading role in addressing major social issues. The Business Roundtable famously marked this sea change in 2019, when it committed to stakeholder capitalism as a core purpose of a corporation. Yet the success of this shift ultimately depends on consumers—and whether they perceive companies’ actions match their promises.
Why It Matters A survey of 2,000 multicultural consumers in the US found impressively high satisfaction with corporate responses across a range of areas—with issues involving diversity drawing the most praise, and climate the least. Notably, there’s little gap in satisfaction between what companies are saying and what they’re doing. The largest “Say/Do gap” was just 11 points: 57 percent are satisfied with companies’ promises to “provide childcare at work” versus 46 percent who are satisfied with their actions. Otherwise, such gaps are largely limited to the low single digits—as are any divergences between how different ethnic groups responded. In short, while much work remains, Americans of all stripes believe companies are acting in accordance with the growing societal commitments they’ve announced—a key sign of the trust that drives sustained business.
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“The term 'hybrid' primarily refers to where or when you work, but the most important shift is how you work.”
— DR. JENNIFER BURNETT, Principal, Human Capital at The Conference Board, discusses career development in a hybrid world on the CEO Perspectives podcast.
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