Insights from The CEO Challenge 2006

Insights from The Conference Board CEO Challenge 2006:
Perspectives and Analysis (Report #1385-06-RR)—Newly Released
This report includes in-depth interviews with 7 CEOs of major global corporations augmented with additional data from The Conference Board CEO Challenge survey, containing responses from 650 CEOs across the globe.

DISCUSSION HIGHLIGHTS:
• The most important theme emerging in the CEO discussions is the growing awareness among Asian leaders that they have nothing to gain by bringing Western economies to their knees through unfair competition. Because Asian-based companies are increasingly relying on Western customers to expand their own markets, there will likely be more attempts by industry and government leaders to work effectively with their Western counterparts. In fact, more than a third of CEOs surveyed globally view managing diverse/cross-cultural interactions as among their chief or their greatest concern.

• Succession planning has evolved. The day of the CEO superhero is either waning or over. Many companies are increasingly aware that well-functioning teams matter more than one individual at the top and that relying too much on one person is being increasingly risky in a turbulent business and political environment. Consistent with this is the widespread concern over succession planning among the 650 CEOs responding to the CEO Challenge Survey. CEOs of both publicly and not publicly traded companies almost equally regard top management succession as either their greatest concern or among their chief concerns. And more CEOs of more successful companies (62%) see a greater challenge concerning top management succession than CEOs of less successful companies (55%).

• Up-and-comers in Asian companies are emulating their predecessors in the technology boom by hopping from company to company to advance their careers and income. As it did in places such as Silicon Valley, this trend is also causing concern about the knowledge that these rising, mobile executives are taking with them when they leave.

• Although a new wave of mergers and acquisitions is underway, it doesn’t look much like the last one—at least, not yet. CEOs interviewed seem to be approaching the prospect of M&As in a more cautious and quiet way, with far more emphasis on strategy than before. Surveyed CEOs in Europe (17%) though are more likely to view “realizing expected return from M&A” as a greater concern than are CEOs in the U.S. (9%).

• High energy costs are feared by some of the CEOs interviewed but not others. Some leaders warn of pervasive, negative impacts; while others see the problem as a gateway to a new golden era of innovation and value creation as the world is finally forced to come up with viable, affordable, alternative energy sources. And still other CEOs remain relatively disinterested. Understandably, surveyed CEOs of manufacturing companies (15%) are significantly more likely to view the rising cost of oil/energy/natural resources as being of greatest concern than are CEOs of financial services (1%) and other services companies (8%).

• CEO discussions revealed that relationships between companies and the analysts who study them are more productive today than in the past. Many in both camps seem to have learned that beating up CEOs because of a down quarter doesn’t serve anyone’s interests over the long term, as long as the company’s short-term actions are intrinsic to a value-enhancing strategy.

• The imperative to innovate is becoming increasingly diverse, depending on factors like industry, geography, and market cycle, suggests the CEOs interviewed for this study. For example, in developing countries, it’s not just innovative technologies that are challenging the available pool of management and skilled workers to keep pace. Mushrooming consumer product outlets are also pushing the development of savvy, new managers. Correspondingly, over a quarter of CEO survey respondents in Europe view product innovation as their greatest concern, while CEOs in Asia find it to be less of a challenge (only 15% view it as their greatest concern).

• Many European companies are being squeezed to invent new business models that can mitigate the impacts of globalization without causing social upheaval. And because many companies in the U.S. have been so successful at innovating, one of their biggest headaches right now is coming up with new ways to either fight or overcome the cost of piracy.

• CEOs view differences in business concerns between U.S. and European CEOs and those of Asian CEOs as a product of context. For example, the higher the rate of growth in a region, the bigger the potential impact of a major catastrophe. And Asian companies don’t yet have access to the same advanced risk mitigation measures commonly available in the West, such as affordable insurance. In support, the report notes that 15% of CEOs in Asia view business risk management/contingency planning as a greatest concern; while only 5% of CEOs in the U.S. feel the same .

About This Report
The seven CEOs interviewed at length are:

Stephanie A. Burns, Chairman, President and CEO, Dow Corning Corporation
Bertrand Collomb, Chairman of the Board of Directors, Lafarge S.A.
Gerhard Cromme, Chairman of the Supervisory Board, ThyssenKrupp AG
Adi B. Godrej, Chairman, The Godrej Group
Thomas S. Haggai, Chairman and CEO, IGA, Inc.
Sajjan Jindal, Vice Chairman and Managing Director, JFW Steel, Ltd.
Lim Chee Onn, Executive Chairman, Keppel Corporation, Ltd.

The majority (62%) of the 650 CEOs responding to The Conference Board CEO Challenge 2006 Survey are heads of U.S. companies; 20% are heads of Europe-based companies; and 7% are Asian-based (11% are listed as “other”).
Related publications from The Conference Board
CEO Challenge 2006: Top 10 Challenges, Report #1380
Mid-Market CEO Challenge 2006, Report #1383
On The Record with Sajjam Jindal, Executive Action #195
On The Record with Bertrand Collomb, Executive Action #193
On The Record with Lim Chee Onn, Executive Action #190
On The Record with Stephanie A. Burns, Executive Action #197