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Shareholder Activism, Increased Expectations Add to Pressure on CEOs

CEOs and boards of directors are feeling the pressures of increased stakeholder activism and scrutiny. When asked in the RHR International 2013 CEO Snapshot Survey about the current biggest threat to their tenure, 22 percent of CEOs cited “failure to perform to stakeholder expectations,” compared to just 12 percent in January 2012. In addition, more than half (57%) say that they will be driving a change in their company’s strategy this year.

“Coming out of the recession, CEOs and their stakeholders have refocused on investments in growth,” says Dr. Thomas J. Saporito, CEO and chairman of RHR International. “The previous economic environment was just not conducive to that approach. Now that the possibilities are greater, CEOs and stakeholders must act in concert. Well-managed companies embrace their stakeholders, rather than try to manage their expectations.”

The results of the annual survey of 100 public and private company CEOs from a wide array of industries support the trend of transparency, seen not only within the role of the CEO, but also within the business models they put into place. We are now in a time where increased transparency is part of the social contract businesses have with their stakeholders,” says Dr. Saporito. “Moving forward, we will continue to see CEOs be more open regarding the processes that make up the organization.”

Other major findings of the survey include:

  • Experienced CEOs nurture talent differently than first-time CEOs. The survey found that nearly half of both experienced and first-time CEOs favor differing methods for identifying and developing senior executive talent. First-time CEOs’ top strategy for doing so is exposing talent to board members (43%), while experienced CEOs prefer coaching and mentoring talent themselves (50%).
  • Some CEOs are planning their succession too early. While 25% of CEOs report planning for their succession within the first year on the job, their time could be used more wisely. “It’s a mistake to think about your exit strategy until after year one,” says Dr. Saporito. “Typically, using very early stages of tenure for succession planning is only fitting when the successor is coming from outside of the organization, as it allows the board time to become familiar with that person.”
  • CEOs want employees to know that they don’t have all the answers. In open-ended answers, survey respondents stated that, despite how well-informed CEOs are, they want to dispel the myth that they have all the correct solutions to every problem or issue. “The authority of the role of the CEO will always be there,” says Dr. Saporito, “but one of the things the CEO can do to relieve that pressure is build senior teams that share some of the responsibility.”

The CEO Snapshot Survey data collection was conducted online in November and December 2012 by Harris Interactive Service Bureau. It examines the opinions of 100 U.S. chief executive officers at public and private companies.




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