Short-Term & Long-Term Impacts Of Global Economic Slowdown.

Half of CEOs of multinational corporations across the globe report that they have laid off staff and 46 percent have outsourced non-core functions in response to today’s challenging economic environment. And although those actions were a response to current economic pressures, CEOs do not expect them to be short-term fixes but instead view them as long-term adjustments to company strategy. This is one of the findings to emerge from PricewaterhouseCoopers’ fifth annual Global CEO Survey, which interviewed 1,161 chief executives from Europe, Asia and the Americas. The study was unveiled today at the World Economic Forum annual meeting in New York.

Despite the economic slowdown and uncertainties surrounding the timing and strength of economic recovery, chief executives clearly believe abundant opportunities remain over the long term. They have been careful to preserve those activities they believe are important to future growth and competitiveness; for example, large majorities of CEOs report that they have refrained from cutting back on research & development (82 percent), curtailing expansion plans (76 percent) and closing plants or offices (76 percent).

“Companies are not taking knee-jerk actions to respond to current economic pressures. They are making strategic decisions-keeping their R & D programs intact, for example, while making long-term adjustments to the sizes of their workforces and outsourcing non-core functions,” said Samuel A. DiPiazza, Jr., Global CEO of PricewaterhouseCoopers. “Chief executives are keeping the global economy in mind as they steer their companies through today’s challenging business environment.”

Though it is clear that they are thinking in global terms with respect to company strategy, the survey found that CEOs have mixed views on issues related to globalisation generally. Forty-four percent of CEOs believe that the anti-globalisation protest movement does not pose a genuine threat to business in the 21st century, but one-third of CEOs believe the movement does indeed pose a threat. CEOs were also divided when asked whether globalisation will exclude developing countries and increase the gap between rich and poor nations: 47 percent do not believe globalisation will have these negative effects, but 33 percent agree such effects are likely. Still, an overwhelming number of CEOs view globalisation as a positive force for economic (87 percent) and social (79 percent) change.

No matter what their attitudes toward the anti-globalisation movement, there is strong support for the continuation of the global meetings that tend to bring out the anti-globalisation protesters. When asked whether the G8 governments should abandon their annual summit in light of the violence at the 2001 Genoa meeting, three out of four (75 percent) respondents said no.

“Globalisation creates risk as well as opportunity, and business leaders have considerable responsibility to help make it a constructive, rather than destructive, force,” said Mr. DiPiazza. “The good news is that CEOs seem to appreciate the importance of their roles. They voice a strong commitment to corporate social responsibility and say that responsible behaviour toward employees, shareholders, and communities is not a luxury for good economic times but a core concern at all times.”

Sixty percent of respondents do not believe that corporate social responsibility should assume a lower priority in the current economic climate. And almost 7 in 10 (68 percent) of respondents agree that corporate social responsibility is vital to the profitability of any company. There is also a strong trend in favor of disclosing more information about corporate social responsibility: 24 percent of CEOs say that they currently issue a public report dedicated to corporate social responsibility issues and an additional 14 percent say that they plan to do so in the future.

Corporate reporting generally-of both financial and nonfinancial information-is a source of both frustration and opportunity for the CEOs. The survey revealed a perceived difference of opinion between the factors CEOs say are important in assessing their companies’ value and those they say investors consider when assessing their companies. For example, 83 percent of CEOs emphasize the significance of workforce quality and retention, but only 51 percent of respondents believe investors emphasize this measure. This discrepancy was also apparent with respect to innovation/R & D, with 74 percent of CEOs saying it is important but only 57 percent saying investors consider it important.

“Companies have a tremendous opportunity to educate the investor about why such factors as R & D and workforce quality and retention are important,” said Mr. DiPiazza. “There has been great progress in the development of methods for measuring and reporting on the value of these and other intangible assets. The opportunity for companies lies in communicating the importance of intangible assets to the investing public and, more broadly, re-examining the relevance of current corporate reporting models.”

E-business is another source of both uncertainty and promise. Nearly half of CEOs (46 percent) surveyed report that Internet-based sales are tracking below expectations. And a strong majority (68 percent) believes that concerns about security and privacy are inhibiting the growth of e-commerce.

“E-business remains promising,” said Mr. DiPiazza. “But privacy and security have been persistent obstacles, according to nearly 7 in 10 CEOs. If companies are to realize the enormous potential of e-commerce, they must do more than simply tell customers that their online transactions are secure-they have to convince customers that they have stringent safeguards in place that are virtually immune to failure.”

The survey is based on 1,161 detailed telephone interviews with chief executives from Europe, Asia and the Americas and covered a variety of issues related to the global economy. Thirty-seven percent of survey respondents head companies that employ more than 5,000 people globally. Interviews were conducted during the months of October, November and December 2001 and early January 2002.

For more information at http://www.pwcglobal.com