DAVOS, Switzerland--(PRIME NEWSWIRE)--Jan. 22, 2008
Availability of Talent, Over-Regulation Also Among Chief
Concerns
CEOs' confidence about prospects for business declined for the first time since the 2003 survey and fear of a global recession emerged as the major threat to
growth in PricewaterhouseCoopers 11th Annual Global CEO Survey.
Compared to last year, possible economic downturn is the only risk
factor to increase in concern among CEOs. All other risks to growth --
including energy supply, global climate change, and terrorism --
declined as business threats. Over-regulation and availability of
talent were also top CEO concerns.
The percentage of CEOs who said they are "very confident" about revenue
growth over the next 12 months fell two percentage points from last
year to 50%. CEOs, however, remained nearly twice as confident as they
were in 2003. The survey results were released today at the World
Economic Forum annual meeting in Davos, Switzerland.
The overall drop in business confidence was most pronounced in North
America, where just 35% of CEOs said they were 'very confident' about
growth, compared to 53% last year, a decline of more than a third.
Confidence among Western European CEOs also declined to 44%, down by
eight percentage points. In contrast, CEO confidence in the surging
economies of Asia Pacific, Latin America, and Central and Eastern
Europe, increased, rising to about 55% in each of those regions. This
growing confidence is especially strong in China and India -- where 73%
and 90% of CEOs, respectively, were "very confident" about the
prospects for growth in the next 12 months.
This year's results marked the first time since the survey's inception
11 years ago, that CEOs cited a potential economic downturn as the
major threat to their business growth prospects. Until now, CEOs had
consistently rated over-regulation as the primary risk to their
business. Terrorism and the threat of pandemic, once major CEO concerns
were cited by only 31% and 28% of respondents, respectively.
"The credit crunch and the slowdown in the Western economies have
created a clear split in the confidence levels of CEOs around the
world," said Samuel A. DiPiazza, Global CEO of PricewaterhouseCoopers.
"The possibility that the downturn could worsen into recession looms
large for CEOs in established economies like the U.S. and Western
Europe. In the newly-emerged economies CEO confidence remains strong,
perhaps because they have experienced nothing but rapid expansion for a
decade or more."
Further highlights of the survey results:
Climate Change Threat Requires Government Action
Climate change, despite the highly-visible debate over global warming,
was cited as a concern by only 34% of CEOs worldwide (down from 40%
last year), while the remainder said they did not feel this was a
threat to their business. Only 37% said their organisation was
investing significant resources to address the risks and opportunities
presented by climate change. However, in marked contrast to their fear
of over-regulation, four-fifths of CEOs, called for an increase in
government action to reduce emissions. Support for increased government
intervention was highest among CEOs in Asia Pacific, at 90%, and lowest
in North America, 64%. CEOs also favoured collaborative efforts to
mitigate climate change. Overall 73% of CEOs believed that businesses
need to collaborate more effectively with industry peers and business
partners in mitigating climate change. This number rose to 82% in Asia
Pacific and declined to 58% in North America.
Threat of Over-Regulation Declines
In contrast to previous years, when regulatory issues such as
Sarbanes-Oxley dominated CEOs thoughts, the threat of over-regulation
declined this year, though it remained among the top three concerns of
CEOs. Over-regulation was mentioned by 59% of respondents, down from
73% in the previous survey. CEOs felt labour laws, tax regimes, and
education were the top areas in which governments could make
improvements. Just 5% felt improvements were needed in regulation over
initial public offerings or listings on stock exchanges. Overall, more
than half of CEOs said that governments should drive convergence of tax
and regulatory frameworks.
Existing Markets, New Products Keys to Short-Term Growth
Concern about the global economy also impacted CEOs' plans for
expansion over the next 12 months. More CEOs now see their main
opportunities for short-term growth coming from better penetration of
existing markets or developing new products rather than from mergers
and acquisitions or geographic expansion. As they did last year, CEOs
said they preferred to finance future growth from within the company,
rather than external sources such as the debt or equity markets.
Global M&A Activity Looks Set To Rise in 2008
Globally, 24% of CEOs said their company had completed at least one
cross-border merger or acquisition within the past 12 months, while 31%
plan to do so within the next 12 months. CEOs in Western Europe were
most likely to have participated in cross-border M&A activity. The most
popular destinations for M&A activity are Asia, Western Europe, Eastern
Europe and North America.
Interest in M&A in 2008 is highest in Asia Pacific, where CEOs are most
confident, and where Asia Pacific companies have increasingly become
the acquirers rather than the acquired. Asian Pacific CEOs are planning
M&A activity both close to home and abroad. Only 23% of Asia Pacific
CEOs have completed at least one cross-border deal within the past
year, but 34% -- a higher percentage than in any other region -- say
that they intend to do so within the next 12 months. Of those Asia
Pacific CEOs planning M&A in the next 12 months, 25% foresee a
transaction in Western Europe, 31% in North America and 73% closer to
home in Asia.
Obstacles to M&A activity were headed by cultural issues and financial
considerations. However, the issues of political interference or
opposition and possible backlash against a foreign presence in local
markets have increased as barriers to cross-border M&A.
Collaborative Business Networks Emerging
Overall, more than half the CEOs said that collaborative networks will
become a major organisational principle for business, and only 17%
'think the costs and risks of networks outweigh the benefits.'
Nevertheless, 37% still regard the establishment of networks as a
secondary activity.
There was marked regional difference in support for business networks.
More than 60% of CEOs in Asia Pacific believe that networks will be a
defining organisational principle, with the number rising to 83% in
India. However, the percentage fell to 44% in Central and Eastern
Europe.
"Collaboration across business networks is becoming an increasingly
important strategy for successful companies, though it may not be
appropriate in every circumstance," Mr. DiPiazza said.
War for Talent Continues to Rage
The war for talent remains a key concern among CEOs. Overall, more than
two-thirds of all CEOs -- 85% in North America -- said their time was
best spent dealing with people issues. CEOs in Asia Pacific, despite
the region's substantial working age populations, were the most
concerned over the availability of key skills. Asia Pacific CEOs were
most likely to believe that their organisation needs to change the way
it develops talent.
CEOs said that combined technical and business experience, global work
experience and leadership skills are the most difficult areas for their
companies to recruit. Global experience, however, was ranked last among
a list of skills that are critical to their organisation.
"Making sure that their companies have the right talent in place
remains a core issue for CEOs around the world," Mr. DiPiazza said.
"Regardless of the other issues swirling around them, CEOs clearly
understand that having people with the right balance of commercial,
technical and management skills is the key to success in their
organisation."
PricewaterhouseCoopers (www.pwc.com) provides industry-focused
assurance, tax and advisory services to build public trust and enhance
value for its clients and their stakeholders. More than 146,000 people
in 150 countries across our network share their thinking, experience
and solutions to develop fresh perspectives and practical advice.
"PricewaterhouseCoopers" refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a
separate and independent legal entity.
Survey Methodology
For the PricewaterhouseCoopers 11th Annual Global CEO Survey, 1,150
interviews with CEOs were conducted in 50 countries during the last
quarter of 2007. The majority of interviews were conducted by
telephone. A postal survey was administered in Japan. Face-to-face
interviews were conducted in Kenya and China. The research was
coordinated by the PricewaterhouseCoopers International Survey Unit,
Belfast, Northern Ireland, in cooperation with project managers and a
global advisory board of PricewaterhouseCoopers partners. By region,
454 interviews were conducted in Western Europe (Austria, Belgium,
Cyprus, Denmark, Finland, France, Germany, Greece, Italy, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland, Turkey, UK), 277 in Asia
Pacific (Australia, China, Hong Kong, India, Indonesia, Japan, Korea,
Malaysia, Singapore, Taiwan, Thailand, Vietnam), 136 in Latin America
(Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru,
Uruguay, Venezuela) , 130 in North America (US, Canada,), 86 in Central
and Eastern Europe (Czech Republic, Estonia, Hungary, Poland, Russia,
Ukraine) and 37 in the Middle East and Africa (Saudi Arabia, South
Africa, Kenya).
CONTACT: Porter Novelli
for PricewaterhouseCoopers LLP
Kate Alexander
+1 (212)-601-8286
[email protected]
PricewaterhouseCoopers LLP
Mike Ascolese
+1 (646)-471-8106
[email protected]