Great expectations of CEOs

PUBLISHED : Saturday, 19 April, 2008, 12:00am
UPDATED : Saturday, 19 April, 2008, 12:00am

Top executives must do more than just make big profits, survey says

Senior executives in leading mainland companies will have to achieve more than healthy balance sheets and escalating profits if they hope to win plaudits and make their mark in today's fast-changing business environment.

'A prerequisite for a CEO is to get the numbers right, but with China's economic growth, stakeholders presume you will be doing OK on the financial front,' said Chris Liu, partner and Greater China executive vice-president for public relations firm Ketchum.

'Therefore, business performance is now being judged on more than purely financial and economic terms, and in many cases on criteria far removed from those fundamentals.'

Mr Liu's comments are based on the findings of a recent online survey, which canvassed the views of 2,750 influential people in 11 major economies, including the mainland.

Ketchum's purpose was to assess the general level of trust felt in leading corporations, determine what expectations top executives now had to meet and identify the qualities needed to serve successfully as a CEO.

In this context, influential citizens were defined as the 10 to 15 per cent of the overall population, excluding government or other elected officials, who shaped opinions and initiated change in their community.

The results for the mainland highlighted that many CEOs were not meeting broader expectations. They might be exceeding profit targets and running efficient operations but, in other respects, they were definitely coming up short.

This gap between expectations and actual performance is most pronounced in ethics and honesty. Survey respondents understandably felt these were essential criteria for any CEO, and indicated they were too rarely on display. Reflecting the mainland's economic transition and steady acceptance of international standards, the survey also identified a strongly held belief that mainland companies had to start putting people ahead of profits. That means paying greater attention to issues such as employee compensation, consumer care and the environment, and recognising their broader responsibilities within the community.

'There is increasing pressure to take these 'external' factors into account,' Mr Liu said.

'All companies - large and small - must be prepared to state where they stand and know what the stakes are.'

This points to a clear need for executives to do substantially more in the area of corporate social responsibility, and to ensure they are explaining various initiatives more effectively. 'Many CEOs in Hong Kong and China still dodge the media, but those good enough to stand up to public scrutiny will win high marks,' Mr Liu said.

He added that if companies were to win public trust and maintain the support of stakeholders, they specifically had to let people know more about what they were doing to help society and protect the environment.

This is now part and parcel of creating shareholder value, and is becoming a key benchmark of overall corporate performance.

The challenge, therefore, is to introduce social and environmental initiatives while still keeping profitability and innovation firmly on track.

'On a personal level, a CEO has to make a value judgment which boils down to how they want to be seen and what the company embodies,' Mr Liu said.

'There will be heightened expectations and higher scrutiny from this group of influential individuals, who will be increasingly critical to the basic operations of the company.'

Emphasising this, respondents in the survey in the mainland said that, in ranking order, the priorities for corporate investment should be research and development, better employee compensation, reduced costs for consumers and new environmental technology.

They also specified the 'most admired' attributes in individual CEOs, which included philanthropy, having a strong personal code of ethics and the aggressive pursuit of goals.

Above all, a modern business leader in the mainland is expected to be creative, with the strategic ability to turn visions into financial success.

'If you don't answer to these expectations one way or another, the company will stall, or there could be a backlash as perceptions will change,' Mr Liu said.

'That's why companies need to think this through very hard, so whoever represents their intrinsic value and long-term vision can stand up and embody it.'

Any organisation that is 'built to last' has to respect the broad swathe of stakeholder opinion if it hopes to build market share.

Mr Liu said that executives also had to take full note of the way society was opening up at grassroots level.

This means that information - positive and negative - can be disseminated far more quickly by blogs, chatrooms and other channels, with few practical restrictions.

'Word of mouth is much more penetrating nowadays, so people are able to review activities and goings-on in the corporate world in a much more holistic manner,' he said.