Leading the Way is a column written by PricewaterhouseCoopers professional staff. It appears in the Business section of the Bangkok Post twice each month. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the February 20, 2007 issue of the Bangkok Post.
By Matthew Wyborn
Ask a classically trained financial economist about the role of the company in society and the response is likely to focus on the need to maximise shareholder returns. Ask the same question of today's CEO, and the response may well differ.
According to PricewaterhouseCoopers' 10th Annual Global CEO Survey, there is a growing recognition among academics and practitioners alike that the traditional view of the long-term objective of a company is too narrow. To sustain long-term financial growth, management needs to balance the needs of the shareholder against those of other stakeholders, most notably the employee and society.
A business imperative
The idea that responsible business is good business is not new. Some of the world's leading companies were founded many years ago by leaders who recognised that long-term financial success would be more sustainable if the company focused on creating real value for all its stakeholders. These days, globalisation, coupled with continuing distrust of the business community in many parts of the world, makes responsible business even more of a priority.
According to the results of our survey, CEOs are still ultimately focused on the bottom line. Creating a business that will generate long-term sustainable economic growth was cited by many as a critical objective of their term in office. However, it was notable that very few defined success solely in financial terms.
Instead, the survey supports the idea that to gain a competitive advantage, management are increasingly working to align their strategies to factor in the needs of a broader set of stakeholders, including their employees and their local community. The need for such alignment mean that CEOs are being faced with strategic decisions that can often involve having to make some tough trade-offs, especially around balancing cost control with investment in intangible areas such as training, flexible work arrangements or community activities.
The local impact of global change
Looking at the trend toward globalisation, the majority of CEOs surveyed believe this will continue and that it will ultimately prove to be beneficial for both developed and developing markets. However, concerns were raised as to whether such benefits are being evenly distributed. More than 50% of CEOs expressed a view that, while beneficial in the long term, globalisation has adverse effects on society in the short term.
Another concern highlighted was the variation in CEO responses as to whether there was any difference in the degree to which developed and developing nations benefit from globalisation. Emerging economy company CEOs feel significantly more strongly (41%) than their developed economy counterparts (32%) that globalisation currently benefits developed markets more than emerging markets.
The message is clear: companies need to be seen to be contributing, and not simply exploiting, the local communities in which they operate.
Developing global talent
When we asked the CEOs about one lasting achievement that would stand as their legacy, the number one response (21%) centred on employee issues, such as developing talent and building skills through training, and by creating a great working environment.
CEOs are acutely aware of their dependence upon a global talent pool for continued success. Ensuring that the development and lifestyle needs of key employees are met is now an overwhelming priority for many of the study's respondents.
In discussing how best to attract and retain talent, it is interesting to note how highly CEOs value the importance of creating and maintaining a reputation for good corporate citizenship. In fact, 65%% agree or strongly agree that active engagement in social issues will be a key success factor in this regard.
Building a new kind of legacy
Responses to our question on legacy (see table) suggest that the CEOs have a vision of a world where sustainable economic returns can be attained while also meeting the needs of employees and of society. Indeed, the message resonating through the interviews is that sustainable economic returns can only be achieved if the needs of society and the employee are balanced equitably.
Today's leaders are recognising the need to think globally, not territorially, and expansively rather than parochially. Such leaders understand that they can no longer focus only on the bottom line. CEOs are finding that genuine global success can be achieved when the mindset required to truly explore the opportunities of globalisation is also applied to meeting the challenges of playing a meaningful role in global society, a role that embraces and furthers important social goals. In our view, getting this balance right will define the global winners of tomorrow.
