CEO Insights for What's Ahead | 7.13.22
The US labor market continues to be strong, with 372,000 jobs added in June 2022, after a downwardly revised increase of 384,000 jobs in May. The unemployment rate remained at 3.6 percent for the fourth consecutive month, and overall employment is near its pre-pandemic level—down only 0.3 percent (around 500,000 jobs) compared to February 2020. Likewise, wage growth—though it may have plateaued—remains quite strong, holding steady around 5–6 percent (annual growth) since Q4 2021.
Why It Matters?Despite gathering economic headwinds, there is still no clear indication that the labor market is cooling. However, this could change in the months ahead as other economic indicators have already signaled that economic activity is slowing amid rising inflation and Fed interest rate hikes. As a result, hiring may decelerate during the remainder of the year. Meanwhile, the tight labor market and strong wage growth may make it harder to bring down inflation, as firms feel continued pressure to raise prices to cover higher labor costs.
That’s the percentage of S&P 500 companies that tied their CEO’s compensation to ESG performance in 2021. It marks a modest increase from the 59 percent that did so in 2020. Going forward, companies may want to embed ESG goals into their business strategy for a few years?before?incorporating them in compensation programs, allowing time to validate their effectiveness and address any kinks in methodology and reporting. And if companies are looking to have a significant impact on an environmental or social issue, they may want to assess how they can incentivize executives to effectuate changes across the company’s industry and value chain. After all, moving the needle on big issues can’t be done alone.
Why It Matters?To date, many companies have incorporated ESG metrics into executive compensation to send a signal that they take these issues seriously, or in response to perceived investor pressure. Ideally, however, companies should incorporate ESG performance measures because they are tied to the company’s performance and impact.
In a recent survey by The Conference Board Human Capital Center on professional development, more people of color said they were likely to leave their organization if they don’t receive development opportunities than did their White counterparts. Indeed, 68 percent of Black respondents, 70 percent of Hispanic respondents, and 80 percent of Asian respondents said they would quit without opportunities to develop their work-related skills, compared to 53 percent of White respondents. But, the survey reveals, more people of color say they lack opportunities and resources for professional development.
Why It Matters?As businesses struggle to attract and retain qualified workers, HR leaders should reconsider the value of investing in employees’ professional development. Providing and promoting these opportunities can engage and retain staff of?all backgrounds, ensuring diversity of thought and experience within your organization.
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In June, a pulse survey from The Conference Board Marketing & Communications Center asked CMOs, CCOs, and their team leaders about the critical challenges they are facing in their current roles. With all the turmoil and change going on in the stakeholder ecosystem, it is not surprising that their challenges are both numerous and varied. Topping the list is managing these stakeholders, organizing their teams, ensuring they have the right resources, proving that investment in their teams is working, and then benchmarking their actions against their peers.
Why It Matters?Understanding the pressures and the needs of your teams enables you to harness their power and focus it on the actions that are of the greatest importance to the business. It also helps to show empathy for how your teams will think about getting their work done. In?CEO Excellence?by Dewar, Keller, and Malhotra from McKinsey, this is clearly stated as, “The best CEOs place heavy emphasis on solving for the team’s psychology and let the mechanics of execution follow.” Right now, The Conference Board survey shows that team psychology is stretching, and it will need your support.
In 2020, renewable sources accounted for 19 percent of the energy generated in the US—roughly double their share in 2000. But this shift has been highly uneven: While renewables—including solar, wind, hydroelectric, and biomass—grew their share by 10 percentage points nationwide over the last two decades, fully two-thirds of states fell below this overall trend, while just one-third exceeded it. This illustrates the centrality of state and local policy regimes in shaping energy use and climate goals.
Why It Matters?As of 2020, 60 percent of US energy generation still came from fossil fuels—a far cry from America’s Paris pledge to reach 100 percent carbon-free electricity by 2035. To help close the gap, the EPA has identified policy tools that states can use to incentivize renewable energy in their own grids, while municipalities like New York City are pioneering new frameworks for reducing their local carbon footprints. Likewise, consumers and investors are raising the pressure on firms to go beyond legal targets—making clear that collaboration and innovation across all levels of government and the private sector will be the key to successful energy transition in the years and decades ahead.
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“USMCA countries could become energy independent. It's not a supply problem. It's a question of making sure we can get the transportation, the capacity taken care of. And of course, with Mexico, it’s about liberalization of the economy. It is in the three countries' interests to do this. It’s more than just a possibility. I think it's a probability.”
—Dr. LORI ESPOSITO MURRAY, President of the Committee for Economic Development, the public policy center of The Conference Board (CED). Lori talks "Onshoring with Friends" with CEO Steve Odland on the?CEO Perspectives?podcast:
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