21st CEO Survey - The Anxious Optimist in the Corner Office
21st CEO Survey The Anxious Optimist in the Corner Office ceosurvey.pwc
2 | PwC’s 21st CEO Survey Contents 3 13 18 26 Global vs. Organisational Growth: Threats: What Keeps CEOs Up at Global vs. Local Prosperity: A Message from PwC Global Carpe Diem Night Differs By Region Navigating a Fractured World Chairman Bob Moritz 29 21st CEO Survey Methodology 30 Endnotes 31 PwC Network Contacts
3 | PwC’s 21st CEO Survey Global vs. Organisational Growth: Carpe Diem Despite highly publicised handwringing over geopolitical uncertainty, corporate misbehaviour, and the job-killing potential of artificial intelligence, PwC’s 21st CEO Survey reveals surprising faith and optimism among chief executives in the economic and business environment worldwide, at least over the next 12 months.
4 | PwC’s 21st CEO Survey Why are CEOs around the world so Ehiit 1 optimistic? And why doesn’t their global good cheer translate into equivalent A majority of CEOs believe global economic growth will ‘improve’ exuberance regarding their own over the next 12 months organisation’s growth prospects? This year saw the highest-ever jump to the Q Do you believe global economic growth will improve, stay the same, or decline over the next 12 months? highest-ever level of CEO optimism regarding 57% Improve global growth prospects over the next 12 53% months (see Exhibit 1). For the first time 52% 48% 49% 49% since we began asking the question in 2012, 44% 44% the majority of CEOs surveyed believe global economic growth will ‘improve’. In fact, the 34% 37% 36% Stay the same percentage of CEOs predicting ‘improved’ 29% growth doubled from last year. This record 28% 27% level of optimism holds fast across every 23% region from North America (defined as the 18% 17% 17% US and Canada for this survey) and Latin 15% America to Western Europe, Central & Eastern Europe (CEE), Africa, the Middle 7% 5% Decline East, and Asia-Pacific (see Exhibit 2). 2012 2013 2014 2015 2016 2017 2018 Source: PwC, 21st Annual Global CEO Sure ase: All resonents 2018 1,23€ 2017 1,37€ 2016 1,40€ 2015 1,322€ 2014 1,344€ 2013 1,330€ 2012 1,258‚ƒ Please note: „ro… 2012†2014 resonents were as‡e ‘‰o ou belŠee t‹e Œlobal econo… wŠll Š…roe, sta t‹e sa…e, or eclŠne oer t‹e neŽt 12 …ont‹s‘’
5 | PwC’s 21st CEO Survey Ehiit 2 All regions report record levels of optimism regarding 2018 Q Do you believe global economic growth will improve, stay the same, or decline over the next 12 months? i C‹art s‹ows ercentaŒe o˜ resonents answerŠnŒ ‘Š…roe’ƒ 97% 95% 139% 113% 87% 1% 63% 38% ™ncrease ˜ro… 2017 to 2018 65“ 63“ 60“ 58“ 57“ 2“ 50% 52“ 49% 44% 45%45% 44% 45“ 41% 41% 40%39% 41“ 37% 37% 34% 33% 34%33% 34% 29% 31% 30% 27% 26% 27%28% 26% 26% 28% 26% 28% 25% 21% 20% 22% 18% 18%18% 19% 17% 15% 15% 16% 16% 13% 13% 8% 10% 7% NA Global ”atŠn A…erŠca •ort‹ A…erŠca AsŠa†PacŠfic —estern Euroe šŠle East CEE A˜rŠca 20122013201420152016201720182012201320142015201620172018201220132014201520162017201820122013201420152016201720182012201320142015201620172018201220132014201520162017201820122013201420152016201720182012201320142015201620172018 Source: PwC, 21st Annual Global CEO Sureƒ ase: All resonents 2018 1,23€ 2017 1,37€ 2016 1,40€ 2015 1,322€ 2014 1,344€ 2013 1,330€ 2012 1,258‚ Please note: „ro… 2012†2014 resonents were as‡e ‘‰o ou belŠee t‹e Œlobal econo… wŠll Š…roe, sta t‹e sa…e, or eclŠne oer t‹e neŽt 12 …ont‹s‘’
6 | PwC’s 21st CEO Survey Ehiit 3 CEOs are more cautiously confident in their own growth prospects in 2018, We have only to look past frantic geopolitical a steady recovery that looks set to continue except in North America headlines to current economic indicators to in 2018. Even the UK economy, while slowing understand the reason why. When all the this past year, has not yet been severely Q How confident are you about your organisation’s prospects for revenue growth over the next 12 months? data is in, 2017 will almost certainly turn out impacted by Brexit.2 to be the best year the global economy has i C‹art s‹ows ercentaŒe o˜ resonents answerŠnŒ ‘er confient’ƒ 1 As for the United States, the domestic seen since 2010. This rising tide is not just 54 3 an overall macroeconomic phenomenon; it is economy is chugging along at 3% growth. 53% •ort‹ A…erŠca balanced across regions. Most of the world’s The Trump administration’s pro-business 52 major economies are experiencing positive agenda of deep corporate tax cuts and rolled- 50 growth in contrast to the situation just a few back regulation has helped accelerate one of 48 years ago. In 2015, Russia and Brazil were the longest stock market booms in history, 46 in recessions brought on by plummeting while driving corporate confidence to new ”atŠn A…erŠca 45“‚ 4 44 AsŠa†PacŠfic 44“‚ commodity prices and political unrest. The highs and jobless rates to new lows. 42 Global 42“‚ southern countries in the Eurozone – most It’s no wonder that North America is so 40 CEE 40“‚ notably Greece – were on the brink of default, positive, with nearly two-thirds of CEOs or in default, on their debt and threatening 38 —estern Euroe 38“‚ to bring down the euro. And China’s surging reporting that they believe global economic 36 growth had taken a hit from the Shanghai growth will improve, and a majority 34 indicating that they are ‘very confident’ about šŠle East 33“‚ market crash. their own organisation’s revenue growth in 32 Now, global commodity prices seem to have 2018 (see Exhibits 2 and 3). 30 stabilised at a moderate level. Russia and 28 Brazil have returned to modest growth; China 26 A˜rŠca 26“‚ is doing well, and the Eurozone has mounted 2017 2018 Source: PwC, 21st Annual Global CEO Sure ase: All resonents 2018 1,23€ 2017 1,37‚
7 | PwC’s 21st CEO Survey Now that President Trump can claim victory on tax reform, we expect that the US economy will continue to grow, in the short term at least. However, the next billion consumers are not going to come from North America or Western Europe, but from the rest of the world. Furthermore, the real competition for Western-based multinationals is increasingly coming from local “piranha” companies in these markets as they develop ever stronger and more sophisticated marketing and technology skills (especially in China). Sir artin Sorrell E €‚‚ For some, this burst of optimism is itself a little breathing space before difficult times a majority of CEOs demonstrate the highest as compared with the next highest region, reason for continued optimism and is return. For a lasting recovery, we need a possible level of confidence in their company’s Western Europe at 45%, and a global average grounded in a sound rationale. As part of this more comprehensive, broader-based, more revenue growth prospects over the next 12 of 42%. year’s survey, we asked leading economists deliberate change of context.” months. and business thought leaders to comment When we look at the geographic markets on the survey findings. Glenn Hubbard, Indeed, beyond North American shores, This divide is quite striking. While the rest CEOs are turning to for growth, again, North economist and dean of Columbia Business CEOs’ optimism is more tempered, specifically of the world is cautiously optimistic, North America, specifically the United States, tops School, observes: “We are in a cyclical regarding their own organisation’s revenue American CEOs have never been more sure of the chart; 46% of global CEOs consider it recovery that has been going on for many growth prospects beyond 2018. With their companies’ near-term prospects. Just last one of the three most important countries years since the financial crisis. People have respect to the next 12 months, CEOs remain year, only 39% reported that they were ‘very for growth, followed by China at 33% (see gotten more optimistic. I think in most parts confident; in fact, the percentage of ‘very confident’; that figure jumps to 53% this year ‘US Widens the Gap with China’). Germany of the world, CEOs believe that changes confident’ responses overall climbs. But (see Exhibit 3). The last time North American strengthens its hold on third place, with one in policy are going to continue to improve the record jump in positivity with regard to CEOs were this exuberant was in 2007, the in five CEOs considering it an important growth.” global economic growth does not translate year before the global financial crisis. growth market. With the full impact of the into an equivalent leap in confidence in their Brexit vote still an open question, the UK is Others are not so sanguine and see signs own organisation’s 12-month prospects. When asked what will drive that growth, in a holding pattern at #4. And India bumps of irrational exuberance. Noted economic Regionally, it’s a mixed bag (see Exhibit 3), virtually all North American CEOs point to Japan as the fifth most attractive market in historian Carlota Perez asks, “Is this a real with North America, Latin America, Central organic growth (94%), followed by new M&A 2018. Russia regains its place in the top 10, recovery or just a short-term blip? Historically, & Eastern Europe, and Asia-Pacific reporting (61%) and cost reduction (59%). Of note is and Canada basically switches places with when there is a real transition into prosperity, higher levels of ‘very confident’, and the rest North American CEOs’ reliance on mergers Mexico (see Exhibit 4). everybody feels it. I hope leaders don’t of the world moving in the opposite direction. and acquisitions as compared with the rest of believe this recovery is permanent. It is just Still, North America is the only region where the world – 61% cited it as a growth driver,
8 | PwC’s 21st CEO Survey 217 218 Ehiit 4 1 43% ›S ›S 46% The US remains 2 33% C‹Šna C‹Šna 33% the top spot for 3 17% Ger…an Ger…an 2% global investment, 4 15% ›œ ›œ 15% while India moves 5 8% žaan ™nŠa 9% into the top 5 6 7% ™nŠa žaan 8% Q hich three countries, excluding the country 7 7% raŸŠl „rance 7% in which you are based, do you consider most important for your organisation’s overall growth 8 6% šeŽŠco raŸŠl 7% prospects over the next 12 months? 9 5% „rance Canaa 6% 1 5% AustralŠa ¡ussŠa 5% 11 4% ¡ussŠa AustralŠa 5% 12 4% SauŠ ArabŠa ¢onŒ œonŒ 5% 13 4% ™nonesŠa šeŽŠco 4% 14 4% ¢onŒ œonŒ œorea 4% Source: PwC, 21st Annual Global CEO Sureƒ 15 4% Canaa ›AE 4% ase: All resonents 2018 1,23€ 2017 1,37‚
9 | PwC’s 21st CEO Survey Ehiit 5 The US pulls further away from China as the top market for growth prospects The US widens the gap with China Q hich three countries, excluding the country in which you are based, do you consider most important for your organisation’s overall growth prospects over China and the US have vied for the top spot in the next 12 months? terms of attractiveness to global investment for years, but China held firmly to the lead 46% ƒS until 2015, when its stratospheric growth significantly decelerated. Since then, the 43% United States has gained ascendancy and steadily pulled further away (see Exhibit 5). 46% (It’s worth noting that the survey parameters 39% 12% do not permit a CEO to vote for the country 38% in which his or her company is based, so US CEOs did not participate in this vote of confidence.) 34% 34% 33% 33% 33% hina 31% 3% 23% 2013 2014 2015 2016 2017 2018 Source: PwC, 21st Annual Global CEO Sure ase: All resonents 2018 1,23€ 2017 1,37€ 2016 1,40€ 2015 1,322€ 2014 1,344€ 2013 1,330‚
10 | PwC’s 21st CEO Survey “Three factors make the United States But don’t count China out. Although it no favourable to business now,” notes CEO longer rides a 10% growth juggernaut, advisor and author Ram Charan. “First, no China remains a global growth engine with country has better mechanisms for funding steady growth of 6.5 to 7% and a stable risks or for raising capital. Second, robotic government.5 Where China lags the United technology is advancing rapidly, and thus States is in the ease of doing business – labour cost arbitrage – less expensive labour the World Bank ranks China 78th (of 190 in other countries – is no longer a restricting economies) on this overall measure, while factor. Third is growth. At 3%, it is a huge the US ranks sixth (although Hong Kong factor. And despite a labour shortage, high- is even more inviting, at number five). The level skills in the US are still the best in the Chinese government recognises that foreign world. Foreigners who want to succeed in the direct investment has slowed, and it has US market want to build plants there. The implemented important reforms to open its corporate tax cut will likely accelerate foreign market, particularly in the financial services direct investment in America, especially from sector.6 Europe and Japan.” Confirming Charan’s second point is the fact that Industrial Manufacturing CEOs overwhelmingly pick the US as their top destination for investment next year (43%) versus China (27%).
11 | PwC’s 21st CEO Survey The question is, what will happen to CEOs’ Interestingly, there was some foreshadowing and are vulnerable to interest rate hikes. generally positive outlook beyond 2018? of the Great Recession in the two preceding CEOs are prescient enough to consider the years, when ‘very confident’ levels began possibility that a downturn might be on the When we asked CEOs about their own their descent. longer-term horizon and are placing their organisation’s growth over the next three bets accordingly. years, the bandwagon slows down (see But don’t read into this dip as a similar Exhibit 6). While still generally confident, harbinger of doom. It may simply be harder Ironically, it is those CEOs who have been in more CEOs say they are ‘somewhat confident’ for CEOs to see beyond the near term. office longer – 11 to 25 years – who are rosiest rather than ‘very confident’. In fact, all regions So much has happened in political arenas in their assessment of the global economy and –North America included – report flat to around the world that expert observers could their own organisation’s prospects. They’ve diminished levels of ‘very confident’ not have predicted. Meanwhile, geopolitical weathered previous storms and can see the in their own longer-term prospects. sabre-rattling and terror incidents multiply opportunities ahead. Particularly restrained are CEOs in the and intensify, and the impact of technology Middle East and Central & Eastern Europe, is becoming increasingly disruptive. What emerges as we look more closely where ‘very confident’ responses reach Combined, these conspire to cloud any CEO’s at the data is an interesting dichotomy: near-record lows, down 33% and 26%, view of the road ahead. a resoundingly optimistic global outlook respectively, from last year. with a more tempered view of their own More than half of the CEOs in this year’s organisation’s performance. Typically, CEOs report more confidence in the survey have been in office for less than five longer term than in the immediate future. The years, which means they have never led their last time we saw ‘somewhat confident’ levels current company through a serious downturn. above ‘very confident’ levels was in 2009, The global economy has been in recovery for when confidence, in general, took a nosedive eight years since the post-crisis low point of in the aftermath of the global financial crisis. mid-2009. Asset prices today look fully valued
12 | PwC’s 21st CEO Survey Ehiit 6 When it comes to confidence about their own three-year prospects, CEOs are more cautious Q How confident are you about your organisation’s prospects for revenue growth over the next years? 51% 51% 51% 5% 49% 49% 49% 49% 47% 46% 46% 46% Some‡hat confi†ent 45% „ery confi†ent 44% 44% 44% 43% 42% 42% 42% 42% 41% 34% 2007 2008 200 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: PwC, 21st Annual Global CEO Sure ase: All resonents 2018 1,23€ 2017 1,37€ 2016 1,40€ 2015 1,322€ 2014 1,344€ 2013 1,330€ 2012 1,258€ 2011 1,201€ 2010 1,18€ 200 1,124€ 2008 1,150€ 2007 1,084‚
13 | PwC’s 21st CEO Survey Threats: What Keeps CEOs Up at Night Differs By Region This anxiety shows up clearly in CEOs’ assessment of the threats to their organisation’s growth prospects. ‘Extreme concern’ levels climb across almost all the main threats we measure. An interesting exception is over-regulation, which stayed flat at 42%. That’s not to say that over- regulation is no longer a top concern – in fact, it is the top concern globally, and in the top five across every region surveyed (see Exhibits 7 and 8). It’s just that it’s always been a top concern – in fact the top ‘extreme concern’ since we began asking the question in 2008. Now others are rising to the fore, such as terrorism – which vaulted from No. 12 to No. 2 overall –and geopolitical uncertainty, which is a top-five threat in every region except Asia-Pacific, where it ranks sixth.
14 | PwC’s 21st CEO Survey 217 218 Meanwhile, the threat of ‘uncertain economic Ehiit 7 1 42% Oer†reŒulatŠon Oer†reŒulatŠon 42% growth’, the No. 2 ‘extreme concern’ globally last year, drops to No. 13. ‘Exchange rate Terrorism and cyber 2 34% ›ncertaŠn econo…Šc Œrowt‹ £errorŠs… 41% volatility’ at No. 3 in 2017 barely makes the threats moved up; top 10 this year (see Exhibit 7). 3 31% EŽc‹anŒe rate olatŠlŠt GeoolŠtŠcal uncertaŠnt 4% Each region reports a different mix of threats uncertain economic 4 31% AaŠlabŠlŠt o˜ ‡e s‡Šlls Cber t‹reats 4% as the most concerning, but one general growth and exchange global observation is that CEOs across 5 31% GeoolŠtŠcal uncertaŠnt AaŠlabŠlŠt o˜ ‡e s‡Šlls 38% the world are increasingly anxious about rate volatility 6 29% See o˜ tec‹noloŒŠcal c‹anŒe See o˜ tec‹noloŒŠcal 38% broader societal threats – such as geopolitical moved down c‹anŒe uncertainty, terrorism, and climate change 7 29% ™ncreasŠnŒ taŽ buren ™ncreasŠnŒ taŽ buren 36% –rather than direct business risks such as Q onsidering the following threats to your organisation’s changing consumer behaviour or new market growth prospects, how concerned are you about the 8 26% C‹anŒŠnŒ consu…er be‹aŠour PoulŠs… 35% entrants. The threats that trouble CEOs are following? ClŠ…ate c‹anŒe an increasingly existential. 9 24% SocŠal ŠnstabŠlŠt enŠron…ental a…aŒe 31% i C‹art s‹ows ercentaŒe o˜ resonents answerŠnŒ ‘eŽtre…el concerne’ƒ 1 24% Cber t‹reats EŽc‹anŒe rate olatŠlŠt 29% 11 2% ¤olatŠle co……oŠt rŠces SocŠal ŠnstabŠlŠt 29% 12 2% £errorŠs… ProtectŠonŠs… 29% 13 2% ™nae¥uate basŠc ›ncertaŠn econo…Šc Œrowt‹ 26% Šn˜rastructure 14 19% ProtectŠonŠs… ™nae¥uate basŠc 26% Šn˜rastructure Source: PwC, 21st Annual Global CEO Sure 15 19% ”ac‡ o˜ trust Šn busŠness C‹anŒŠnŒ consu…er 26% ase: All resonents 2018 1,23€ 2017 1,37‚ be‹aŠour
15 | PwC’s 21st CEO Survey In fact, it’s striking what doesn’t top the The one exception is technology-related regarding terrorism has more than doubled, What is AI? It’s making decisions global list of concerns. Comparatively few developments (e.g., ‘cyber threats,’ ‘speed and ‘extreme concern’ about the lack of trust based on very large amounts of data. CEOs highlight ‘potential ethical scandals’ of technological change’, and ‘availability of in business has plunged by nearly 50%. I’ve been hearing about AI for 30 as a threat – despite the growing number of key skills’), where we see anxiety about the years…but it was always a future firms that have suffered reputational damage impending promise and perils of artificial In Western Europe, populism (42%) is the promise. What’s different now? First, in the past year because of ethical lapses.7 intelligence (AI) taking hold. AI is no longer chief ‘extreme concern’, followed by over- the underlying compute capability Globally, despite Brexit, CEOs are not overly the stuff of science fiction movies; it is here, regulation (35%), geopolitical uncertainty is so much faster, meaning systems concerned about the ‘future of the Eurozone’, and it is real. We at PwC project that AI will (34%), cyber threats (33%), and terrorism with fewer than one in five CEOs ranking it contribute an additional US$15.7 trillion to (32%). Again, over-regulation is displaced can crunch through a deluge of data as an ‘extreme concern’. This is true even in global GDP by 2030, an increase of 14%.8 That at the top by the populist political trend almost instantaneously. Two, the Western Europe – in fact, Western Europe boon to the overall economy, however, will sweeping Europe. This year Western Europe’s ability through software to manage and saw the biggest drop in ‘extreme concern’ come at great cost to those who cannot rise to ‘extreme concern’ about climate change more analyse that data is so much better. Do regarding the ‘future of the Eurozone’, from its challenges in time. than doubled. you remember the days when position- 28% to 19%. It seems fears of the Eurozone Asia-Pacific chief executives cite availability sensing elevator technology came at breaking up have subsided with more positive Ironically, North America – the bastion of an exorbitant price? It cost millions to economic numbers in the past year and bullishness – reports high levels of ‘extreme of key skills (52%), speed of technological put that in your building. Now, your supportive monetary policy. concern’ regarding its chief threats. Leading change (51%), terrorism (48%), cyber threats smartphone can tell what floor you’re the list are cyber threats (53%), then over- (44%), and over-regulation (42%) as their on. Your Waze app measures not only CEOs are also not particularly agitated regulation (50%), geopolitical uncertainty greatest worries. But Asia-Pacific CEOs are how fast your car is traveling, and about activist investors, rising employee (44%), terrorism (43%), and speed of worried about everything – at least 20% are benefit and pension costs, access to affordable technological change (34%). For the first ‘extremely concerned’ about every threat on where the other cars are around you, capital, volatile energy costs, or their own time, over-regulation is displaced as the top the list. but your acceleration and deceleration. readiness to respond to a crisis. Again, they threat in North America (see Exhibit 8). Your watch knows your heart rate. All are more troubled by larger societal and Meanwhile, the level of ‘extreme concern’ of this data is being instantly rendered geopolitical shifts than by the dynamics in useable and actionable. their own market. Saˆra ‰Š at‹ E racle
16 | PwC’s 21st CEO Survey Ehiit 8 The perception of top threats varies by region Q onsidering the following threats to your organisation’s growth prospects, how concerned are you about the following? i C‹art s‹ows ercentaŒe o˜ resonents answerŠnŒ ‘eŽtre…el concerne’ƒ •ort‹ A…erŠca —estern Euroe AsŠa†PacŠfic ”atŠn A…erŠca Cber t‹reats 53% PoulŠs… 42“ AaŠlabŠlŠt o˜ ‡e s‡Šlls 52“ PoulŠs… 55“ Oer Oer†reŒulatŠon 5% †reŒulatŠon 35“ See o˜ tec‹noloŒŠcal c‹anŒe 51“ ™nae¥uate basŠc Šn˜rastructure 48“ GeoolŠtŠcal uncertaŠnt 44% GeoolŠtŠcal uncertaŠnt 34“ £errorŠs… 48“ ™ncreasŠnŒ taŽ buren 42“ £errorŠs… 43% Cber t‹reats 33“ Cber t‹reats 44“ Oer†reŒulatŠon 40“ See o˜ tec‹noloŒŠcal c‹anŒe 34% £errorŠs… 32“ Oer†reŒulatŠon 42“ £errorŠs… 38“ ™ncreasŠnŒ taŽ buren 34% ClŠ…ate c‹anŒe an enŠron…ental a…aŒe 27“ GeoolŠtŠcal uncertaŠnt 41“ See o˜ tec‹noloŒŠcal c‹anŒe 35“ AaŠlabŠlŠt o˜ ‡e s‡Šlls 27% AaŠlabŠlŠt o˜ ‡e s‡Šlls 24“ ™ncreasŠnŒ taŽ buren 40“ GeoolŠtŠcal uncertaŠnt 35“ SocŠal ŠnstabŠlŠt 26% See o˜ tec‹noloŒŠcal c‹anŒe 23“ ClŠ…ate c‹anŒe an enŠron…ental a…aŒe 40“ EŽc‹anŒe rate olatŠlŠt 32“ ProtectŠonŠs… 24% ™ncreasŠnŒ taŽ buren 22“ ProtectŠonŠs… 38“ ClŠ…ate c‹anŒe an enŠron…ental a…aŒe 31“ C‹anŒŠnŒ wor‡˜orce e…oŒra‹Šcs 22% ProtectŠonŠs… 22“ EŽc‹anŒe rate olatŠlŠt 37“ SocŠal ŠnstabŠlŠt 28“ CEE šŠle East A˜rŠca AaŠlabŠlŠt o˜ ‡e s‡Šlls 51“ GeoolŠtŠcal uncertaŠnt 63“ SocŠal ŠnstabŠlŠt 50“ Oer†reŒulatŠon 48“ Cber t‹reats 54“ ™ncreasŠnŒ taŽ buren 4“ Oer GeoolŠtŠcal uncertaŠnt 42“ Oer†reŒulatŠon 44“ †reŒulatŠon 48“ £errorŠs… 3“ £errorŠs… 42“ ›ncertaŠn econo…Šc Œrowt‹ 45“ PoulŠs… 3“ See o˜ tec‹noloŒŠcal c‹anŒe 40“ GeoolŠtŠcal uncertaŠnt 45“ C‹anŒŠnŒ wor‡˜orce e…oŒra‹Šcs 37“ ™ncreasŠnŒ taŽ buren 38“ EŽc‹anŒe rate olatŠlŠt 45“ SocŠal ŠnstabŠlŠt 37“ ›ncertaŠn econo…Šc Œrowt‹ 33“ Cber t‹reats 45“ See o˜ tec‹noloŒŠcal c‹anŒe 36“ ›ne…lo…ent 31“ PoulŠs… 43“ ™ncreasŠnŒ taŽ buren 35“ SocŠal ŠnstabŠlŠt 31“ AaŠlabŠlŠt o˜ ‡e s‡Šlls 43“ EŽc‹anŒe rate olatŠlŠt 32“ AaŠlabŠlŠt o˜ ‡e s‡Šlls 2“ ›ne…lo…ent 3“ Source: PwC, 21st Annual Global CEO Sure
17 | PwC’s 21st CEO Survey In regions where emerging economies are Regional overlaps are interesting, but so dominant – Latin America, Central & Eastern are the differences in terms of top threats. Europe, the Middle East, and Africa – ‘social ‘Cyber threats’ are the No. 1 concern in North instability’ is a consistent top 10 ‘extreme America, for example, but rank only 11th in concern’. ‘Protectionism’, on the other hand Central & Eastern Europe and 15th in Latin –which makes the top 10 in North America, America. Similarly, ‘availability of key skills’ Western Europe, and Asia-Pacific – does is the top threat in Asia-Pacific and Central not register as an overriding concern in & Eastern Europe, but is not even among the these regions. top five in any other region. ‘Populism’ rises to the top of the Western European and Latin Looking across the top 10 threat lists of all American threat lists, and is of concern in seven regions, ‘geopolitical uncertainty’, Africa and Central & Eastern Europe, but it’s ‘over-regulation’, and ‘increasing tax burden’ of moderate to low interest in North America, are the three that appear on every region’s Asia-Pacific, and the Middle East. radar (see Exhibit 8). ‘Availability of key skills’ and ‘speed of technological change’ appear on every list except those of Latin America and Africa, respectively. Perhaps the most ominous finding is terrorism’s rise in the rankings; it is a top five ‘extreme concern’ in every region save Africa.
18 | PwC’s 21st CEO Survey Global vs. Local Prosperity: Navigating a Fractured World CEOs continue to recognise the promise of globalisation and feel that promise has been realised to a large extent in select areas such as ‘enabling universal connectivity’ and ‘easing the movement of capital, people, goods, and information’. However, globalisation – which we define as the process by which the world is becoming increasingly integrated – has not been as effective in other respects.
19 | PwC’s 21st CEO Survey Ehiit 9 When asked if globalisation has helped CEOs have mixed views on the benefits of globalisation ‘close the gap between the rich and the poor’, nearly 40% of CEOs respond ‘not at all’. And Q £o w‹at eŽtent ‹as ŒlobalŠsatŠon ‹ele wŠt‹ t‹e ˜ollowŠnŒ areas‘ 30% gave the same bleak assessment of Žo a lar‘e etent globalisation’s impact on ‘averting climate 63% 58% 37% 3% 28% 26% 23% 22% 22% 17% 18% change and resource scarcity’. More than 2% one in four CEOs say that globalisation Žo some etent has not helped improve the ‘integrity and 5% 41% effectiveness of global tax systems’…at all 56% 56% 57% 49% (see Exhibit 9). 57% 56% 57% 53% 37% 39% Œot at all 32% 3% 26% 18% 19% 17% 13% 15% 9% 11% 3% 4% EnablŠnŒ Ease o˜ CreatŠnŒ a ›nŠersal ¢ar…onŠsŠnŒ šanaŒŠnŒ ›‹olŠnŒ „ull an AertŠnŒ ™nteŒrŠt AertŠnŒ ClosŠnŒ unŠersal …oŠnŒ caŠtal, s‡Šlle an access to reŒulatŠons ŒeoolŠtŠcal stanars ˜or …eanŠnŒ˜ul sste…Šc an clŠ…ate t‹e Œa connectŠŠt eole, eucate Šn˜rastructure rŠs‡s t‹e rotectŠon e…lo…ent ˜aŠlure e˜˜ectŠeness c‹anŒe an between Œoos an labour ˜orce an basŠc an et‹Šcal o˜ Œlobal taŽ resource rŠc‹ an Šn˜or…atŠon serŠces use o˜ ata sste…s scarcŠt oor Source: PwC, 21st Annual Global CEO Sure
20 | PwC’s 21st CEO Survey If you look at the history of the world Of course, there are regional differences. over the past 100 years, you see it By and large, Asia-Pacific CEOs tend to going back and forth between the be more sanguine in their assessment of opening of economies and the closing globalisation’s benefits (see Exhibit 10). of economies. Episodes of anti- For example, nearly 70% of Asia-Pacific globalisation come and go as political CEOs believe globalisation has helped – at least somewhat – to close the wealth gap. points of view change. But today we Asia-Pacific is also the most positive about operate in a connected world. Even climate change; 27% of CEOs there believe the most inward-looking governments globalisation has helped avert it ‘to a large cannot block how people talk on their extent’, double the proportion in most other cellphones. regions and nine times the proportion in ’ernar†o „ar‘as “isone ‚resi†ent ” E oˆ IS‰ North America. •atin ‰merican inˆrastr–ct–re con‘lomerate
21 | PwC’s 21st CEO Survey Ehiit 1 Every region believes we are headed toward Asia-Pacific CEOs are the most upbeat about globalisation’s ability to help close the wealth gap “measuring prosperity through multifaceted and avert climate change metrics” Q n your view, to what extent has globalisation helped with closing the gap between rich and poor? Q n your view, to what extent has globalisation helped with averting climate change and resource scarcity? Œot at all Žo some or a lar‘e etent Œot at all Žo some or a lar‘e etent 39% Global 59% 3% Global 67% 26% AsŠa†PacŠfic 7% 18% AsŠa†PacŠfic 77% 4% —estern 59% 28% A˜rŠca 7% Euroe 43% •ort‹ 57% 32% CEE 63% A…erŠca 43% ”atŠn 55% 37% ”atŠn 62% A…erŠca A…erŠca 48% šŠle East 5% 33% šŠle East 6% 53% CEE 44% 4% —estern 59% Euroe 6% A˜rŠca 4% 39% •ort‹ 59% A…erŠca Source: PwC, 21st Annual Global CEO Sure Source: PwC, 21st Annual Global CEO Sure
22 | PwC’s 21st CEO Survey Ehiit 11 Echoing the theme of the World Economic We live in an increasingly fractured world Forum this year, PwC’s 21st CEO Survey speaks to how companies are navigating an Q onsidering the following opposing political, economic, and trade trends, please select the one you believe the world is moving more towards increasingly fractured world. We asked CEOs Sin‘–lar seamless ecosystem –ltiple ˆra‘mente† ecosystem to consider a number of opposing political, economic, and trade trends and pick a side Co……on Œlobal belŠe˜s an 16% 82% šultŠle belŠe˜s an alue sste…s alue sste…s in terms of which way the world was moving SŠnŒle Œlobal rule o˜ (see Exhibit 11). The results are revealing. law an lŠbertŠes 17% 79% šultŠle rules o˜ law an lŠbertŠes SŠnŒle Œlobal …ar‡etlace 23% 73% ¡eŒŠonal traŠnŒ blocs PolŠtŠcal unŠons 28% 65% •atŠonalŠs… an eole natŠons šeasurŠnŒ roserŠt rŠ…arŠl 28% 66% šeasurŠnŒ roserŠt t‹rouŒ‹ t‹rouŒ‹ financŠal …easures …ultŠ˜acete …etrŠcs Econo…Šc unŠons an unŠfie 34% 6% šultŠle econo…Šc …oels econo…Šc …oels ¢ar…onŠsatŠon o˜ 41% 54% ™ncreasŠnŒ use o˜ taŽ co…etŠtŠon Œlobal taŽ rules Concentrate econo…Šc Œrowt‹ 46% 48% —Šesrea econo…Šc Œrowt‹ benefitŠnŒ ˜ewer eole benefitŠnŒ …ore eole Cororate ŠnteŒratŠon 76% 2% Cororate ˜raŒ…entatŠon Oen access to t‹e ™nternet 77% 2% ¡estrŠcte access to t‹e ™nternet Source: PwC, 21st Annual Global CEO Sure
23 | PwC’s 21st CEO Survey Region by region, the world is edging away agreements and the Paris climate accord, Enterprises used their brands to compete in the traditional from its full-on embrace of a singular and and risks to the continued unity of the Gulf industrial economy era. The arrival of the Internet era seamless global marketplace, at least in the Cooperation Council, this data is arresting launched competition among platforms. Today the era physical, geopolitical world. Cyberspace and but hardly surprising. of the Internet of Things has arrived, which leads to corporate integration are the two spheres in competition among ecosystems. Many enterprises have which the world is still moving towards an As many politicians and policymakers in the overarching global model. (Many companies, world’s major economic powers look inward, been focused on products in the traditional industrial era, particularly in the tech sector, already the global innovation model long embraced but in the era of the Internet of Things, enterprises must dwarf entire countries in terms of market by leading multinationals – one based on the pay attention to the entire ecosystem, building capitalisation, and CEOs see that trend free flow of information, money, and talent win-win environments that allow users and stakeholders continuing.) across borders – is at risk. Our 2017 Global to participate in creating and sharing value together. Innovation 1000 Study found that 52% of But most CEOs see the world moving in respondents believe economic nationalism —han‘ ˜–imin ™o–n†er hairman ” E šaier the opposite direction, towards multiple will have a moderate or significant impact belief systems and rules of law, regional on their company’s R&D efforts, replacing trading blocs and increased tax competition, today’s integrated and interdependent and rising nationalism and diverse economic network with isolated R&D nodes.9 models. In the wake of Brexit, the Trump administration’s withdrawal from trade
24 | PwC’s 21st CEO Survey Ehiit 12 One area in which more fragmentation Every region believes we are headed towards ‘measuring prosperity is a welcome development is in the way we measure prosperity around the world. through multifaceted metrics’ CEOs across every region and country recognise that the world is moving away from Q onsidering the following opposing political, economic, and trade trends, please select the one you believe the world is moving more towards ‘measuring prosperity primarily through eas–rin‘ prosperity primarily thro–‘h eas–rin‘ prosperity thro–‘h m–ltiˆacete† metrics financial measures (e.g., GDP)’ and towards financial meas–res eŠ‘Š “D‚ incl–†in‘ ›–alityœoˆœliˆe in†ices ‘measuring prosperity through multifaceted 28% Global 66% metrics (e.g., including quality-of-life indices)’. This is particularly true in Latin 39% •ort‹ A…erŠca 57% America. North America lags the global consensus with nearly 40% of CEOs siding 28% —estern Euroe 69% with traditional financial measures. Still, 57% agree that the world is moving in the direction 28% AsŠa†PacŠfic 64% of multifaceted metrics (see Exhibit 12). Defining those metrics and capturing the data 28% CEE 66% to accurately measure them will be a priority 27% šŠle East 58% agenda item in the coming years. 25% A˜rŠca 71% 19% ”atŠn A…erŠca 79% Source: PwC, 21st Annual Global CEO Sure
25 | PwC’s 21st CEO Survey Ehiit 13 On the larger issue of whether we are “The visible effects of rising income CEOs are divided over whether economic headed into a period of widespread growth inequality have been driving a wave of benefiting the many or concentrated growth populist sentiment,” notes global thought growth will benefit the many or the few benefiting only the few, the jury is still out. leader Michele Wucker. “Many people feel Q ConsŠerŠnŒ t‹e ˜ollowŠnŒ oosŠnŒ olŠtŠcal, econo…Šc, an trae trens, lease select t‹e one ou belŠee t‹e worl CEOs are evenly divided. Most Asia-Pacific that big, multinational corporations and Šs …oŠnŒ …ore towars CEOs (56%) do not see global growth the ultra-rich are getting more than their becoming more concentrated and benefiting fair share. But many also blame the bottom oncentrate† economic ‘ro‡th €i†esprea† economic ‘ro‡th the few, whereas CEOs in the Middle East of the pyramid. Most of the benefits of enefitin‘ ˆe‡er people enefitin‘ more people (62%), Africa (60%), and Central & Eastern globalisation have gone to the top and to the 46% Global 48% Europe (58%) do (see Exhibit 13). (Of note: bottom earners, hollowing out of the middle. Among the regions of Africa, the Middle You can’t talk about globalisation without 62% šŠle East 31% East, and Central & Eastern Europe, only addressing the brewing resentment of the one country is among the top 10 markets for middle and upper middle classes, the mass 6% A˜rŠca 39% global investment according to our survey market for most companies’ goods.” 58% CEE 37% [see Exhibit 4, where Russia is No. 10], which could account for these regions’ pessimism.) 51% —estern Euroe 45% 49% •ort‹ A…erŠca 49% 47% ”atŠn A…erŠca 51% 35% AsŠa†PacŠfic 56% Source: PwC, 21st Annual Global CEO Sure
26 | PwC’s 21st CEO Survey A Message from PwC Global Chairman Bob Moritz: Re-Aligning Global Economic Growth with Local Social Progress We hope you have found PwC’s 2018 Global CEO Survey interesting and useful. While celebrating the prospects for global economic growth – at least in the short term – CEOs in every region report heightened levels of anxiety about their own organisation’s longer-term prospects for revenue growth as they confront growing stakeholder expectations and unprecedented threats that are not of the market’s making.
27 | PwC’s 21st CEO Survey Business executives are contending more value) – have fuelled a virtuous cycle that First, adopt new measures of prosperity in a number, but we can create metrics that A Message from PwC Global Chairman Bob Moritz:and more with the results of societal has lifted billions out of poverty, prolonged that look beyond economic growth to capture and convey effectiveness in meeting Re-Aligning Global Economic Growth with Local Social Progressupheaval – geopolitical uncertainty, life expectancy worldwide, and facilitated a social progress. Financial performance is an these goals. populism, terrorism – rather than economic rich exchange of knowledge and talent that essential element underpinning any market or corporate risks such as access to affordable has spurred unprecedented productivity and economy, but it cannot be the only measure Second, foster a beneficial place for capital, new market entrants, or their own innovation. of success in a globalised economy. Other, technology in our society. Artificial readiness to respond to a crisis. Whether it broader measures, reflecting target outcomes intelligence expands technology’s potential is tax reform in the US, the Brexit talks, the However, the past decade has also seen in societal terms, must also be considered. for both good and ill. There is the clear risk spectre of Catalonian secession in Spain, a growing gap between the beneficiaries As business executives, we can supplement that it may displace more and more of the or China’s emerging vision for the next few of this prosperity, as these same market measures such as GDP and shareholder value human workforce and contribute further years, we continue to see geopolitics play forces – globalisation, technological with indicators of quality of life. to social isolation and the disruption of a critical role in how leaders craft their advances, and financial focus – increase communities. But this need not be the business strategy. transparency and enhance instantaneous, Leading CEOs are already actively exploring whole truth. Emerging technologies can global communication. Now the ‘haves’, alternative metrics for measuring the long- also help meet human needs in new and This year’s study also sheds light on a broader even in advanced economies, are feeling like term health of their companies and the profound ways (e.g., telemedicine, distance trend: the developing misalignment between ‘have nots’. The result has become glaringly communities they serve, beyond just earnings learning) and will create new industries and global economic growth on the one hand and evident in the bitter and divisive politics of or stock price, and boards are facilitating that unforeseen types of new jobs – jobs that will social progress on the other. For decades they our times. Too many people in too many parts shift by asking more qualitative questions: be more creative and fulfilling. CEOs are moved in tandem. Market-based economies of the world feel they are being left behind by What are we doing on talent? What is our already laying the commercial groundwork to have prospered, and so have their citizens. a system that no longer promises them and pipeline of innovation? How do our actions allow this socially positive innovation to take The three principal drivers of change – their children a better life. align with our mission statement? Are our place. In addition, we need to help ensure globalisation, technological advances, and customers satisfied? Are we contributing that it takes place across the globe in a broad financial focus (meaning a view of value What role can CEOs play to help arrest this to our community and society as a whole? and inclusive way. based primarily on GDP and shareholder growing divide? We outline four possible These are things that aren’t easily captured approaches:
28 | PwC’s 21st CEO Survey 10 and with stakeholders. The data and insights Third, educate for the future. Our relying on their employer. Together, they erode a vital commodity: trust. In an educational systems need to equip and companies and their employees can meet the age of enhanced transparency and heightened provided along with other views of the future empower a global workforce with the right future well prepared. accountability, a loss of trust has profound and its possible paths of evolution leave all skills to succeed, and the support of private consequences. Perhaps the most important of us with a lot of things to consider – some enterprise is vital to that effort. Governments, Finally, commit to a purpose. These trends job CEOs – and the broader business worrisome, some challenging, some possibly businesses, and communities can work all highlight the heightened expectations community – can do to contribute divisive. But more importantly, much to be together to match talent with opportunity of the societies and communities in which meaningfully to social progress, as well excited about – we can choose to focus on by pioneering new approaches to educating businesses operate. That’s why every business as business results, is to commit to a the opportunities in front of us, to rise to students and training workers in the fields needs a clear purpose – one that goes beyond common purpose, a shared set of values and meet our own high expectations, and to work that will matter in a technology-enabled financial goals to incorporate a broader set of behaviours, and drive them through our together towards the betterment of ourselves, job market. shared values and behavioural expectations. organisations. Beyond articulating the words, our organisations, and the world in which we Purpose defines ‘who’ a business is and why it each of us must live them in our own actions live. Like the CEOs in our report, we at PwC, The good news is that most CEOs in our exists; values and behaviours define a culture. and behaviours and measure how others in choose to be optimists, anxious or not. survey recognise this ongoing reskilling These act as vital guideposts and benchmarks our companies do the same. responsibility. And even more heartening for every important decision. From is the finding from PwC’s Workplace of environmental footprints to social impacts We hope the insights from PwC’s 21st CEO the Future study that three-quarters of to investor demands, businesses are Survey and the approaches outlined above respondents are willing to take the initiative scrutinised by an ever-wider array of provide you with insights and ideas for further in updating their own skills rather than stakeholders. If they fall short in any respect, consideration within your own organisations
29 | PwC’s 21st CEO Survey 21st CEO Survey Methodology PwC conducted 1,293 interviews with CEOs • 40% of companies had revenues of We also conducted face-to-face, in-depth in 85 countries. Our sample is weighted by $1 billion or more. interviews with CEOs and thought leaders national GDP to ensure that CEOs’ views are • 35% of companies had revenues between from five continents over the fourth quarter fairly represented across all major countries. $100 million and $1 billion. of 2017. Their interviews are quoted in this The interviews were also spread across a report, and more extensive extracts can be range of industries. Further details by region • 20% of companies had revenues of up to found on our website at ceosurvey.pwc.com, and industry are available by request. Eleven $100 million. where you can also explore responses by percent of the interviews were conducted by • 56% of companies were privately owned. sector and location. telephone, 77% online, and 12% by post or face-to-face. All quantitative interviews were Notes The research was undertaken by conducted on a confidential basis. • Not all figures add up to 100%, as a result PwC Research, our global centre of excellence of rounding percentages and exclusion of for primary research and evidence-based The lower threshold for all companies ‘neither/nor’ and ‘don’t know’ responses. consulting services included in the top 10 countries (by GDP) www.pwc.co.uk/pwcresearch. was 500 employees or revenues of more than • The base for figures is 1,293 (all US$50 million. The threshold for companies respondents) unless otherwise stated. included in the next 20 countries was more than 100 employees or revenues of more than $10 million.
30 | PwC’s 21st CEO Survey Endnotes 1 P aul Hannon, “OECD Sees Global Economic Growth Reaching Seven-Year High,” 6 “Doing Business 2018,” World Bank Group, 2017, www.doingbusiness.org/~/media/WBG/ Wall Street Journal, Nov. 28, 2017, www.wsj.com/articles/oecd-sees-global-economic- DoingBusiness/Documents/Annual-Reports/English/DB2018-Full-Report.pdf. growth-reaching-seven-year-high-1511863206?mg=prod/accounts-wsj. 7 Per-Ola Karlsson, DeAnne Aguirre, and Kristin Rivera, “Are CEOs Less Ethical Than in the 2 UK Office f or National Statistics, per https://www.ft.com/content/549bc580-d322-3c36- Past?”, strategy+business, May 15, 2017, www.strategy-business.com/feature/Are-CEOs- 87e4-bfe3331384fe. Less-Ethical-Than-in-the-Past?gko=50774. 3 “N ational Income and Product Accounts Gross Domestic Product: Third Quarter 2017 8 Dr. Anand S. Rao and Gerard Verweij, “Sizing the prize: What’s the real value of AI for your (Third Estimate); Corporate Profits: Third Quarter 2017 (Revised Estimate),” U.S. business and how can you capitalise?,” PwC, 2017, https://www.pwc.com/gx/en/issues/ Department of Commerce Bureau of Economic Analysis, Dec. 21, 2017, www.bea.gov/ analytics/assets/pwc-ai-analysis-sizing-the-prize-report.pdf. newsreleases/national/gdp/gdpnewsrelease.htm. 9 “The 2017 Global Innovation 1000 study,” PwC, 2017, www.strategyand.pwc.com/ 4 DJIA at r ecord high. S&P 500 has logged 13 straight months of gains. Consumer confidence innovation1000#GlobalKeyFindingsTabs3. at a nearly 17-year high. Jobs have grown for 85 straight months. Landon Thomas Jr., “Markets Pass Another Milestone, as Investors Remain Fearless,” New York Times, Nov. 30, 10 “ Workforce of the future: The competing forces shaping 2030,” PwC, 2017, https://www. 2017, https://www.nytimes.com/2017/11/30/business/dow-stock-markets.html. pwc.com/gx/en/services/people-organisation/workforce-of-the-future/workforce-of-the- future-the-competing-forces-shaping-2030-pwc.pdf. 5 “OECD sees g lobal economy strengthening, but says further policy action needed to catalyse the private sector for stronger and more inclusive growth,” Organisation for Economic Co-operation and Development, Nov. 28, 2017, www.oecd.org/economy/oecd- sees-global-economy-strengthening-but-says-further-policy-action-needed-to-catalyse-the- private-sector-for-stronger-and-more-inclusive-growth.htm.
31 | PwC’s 21st CEO Survey PwC Network Contacts Bob E. Moritz Tim Ryan Mike Davies Global Chairman Senior Partner and Chairman Global Communications Director +1 646 471 8486 United States +44 20 7804 2378 [email protected] +1 646 471 2376 [email protected] [email protected] Kevin Ellis Richard Oldfield Ilona Steffen Senior Partner and Chairman Global Markets Leader Global Marketing & Insights Director United Kingdom +44 20 7804 5070 +41 79 210 6692 +44 20 7804 4102 [email protected] [email protected] [email protected] Norbert Winkeljohann Stephanie Hyde Honor Mallon Senior Partner and Chairman Global Clients & Industries Leader Global Lead for PwC Research Germany +44 11 8938 3412 +44 28 9041 5745 +49 69 9585 5566 [email protected] [email protected] [email protected] Raymund Chao Bill Cobourn Chairman Global Chief Marketing Officer Asia Pacific and Greater China +1 646 471 5750 +86 10 6533 5720 [email protected] [email protected]
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