CEOs Offer Insight Into Response To Economic Crisis And Actions Taken To Move Forward In NYSE Euronext 2010 CEO Report: "The Road To Recovery"

A broad U.S. economic recovery in 2010 will be followed by a slower global rebound in 201l or later, according to approximately half of nearly 300 CEOs surveyed in the newly released fifth annual NYSE Euronext CEO Report, entitled “The Road to Recovery,” conducted by Opinion Research Corporation. While a large majority of CEOs favor business tax cuts, low interest rates and lending to spur the economic recovery, U.S. and non-U.S. CEOs are split with respect to the intervention of government in business, yet agree on the need to restructure America’s financial regulatory system, streamline corporate governance measures, and align U.S. and international accounting standards. The NYSE Euronext 2010 CEO Report is available at: www.nysemagazine.com.

“The NYSE Euronext CEO Report 2010 reveals how CEOs have been forced to analyze their past habits and significantly change the way they operate today and plan for tomorrow,” said Jeff Resnick, President of Opinion Research Corporation. “Despite the troubled economy, CEOs have been able to find silver linings, from retaining and hiring skilled staff to strengthening corporate governance. U.S. CEOs and their non-U.S. counterparts have different views on government intervention and other matters, but they generally agree on the needs to be innovative yet disciplined to successfully emerge from the economic crisis.”

Added Duncan L. Niederauer, CEO, NYSE Euronext, “Global CEOs are responsibly addressing the challenges brought on by the financial crisis, and are employing genuine operational discipline and planning for the future. They are focused on maintaining a strong balance sheet and on corporate competitiveness, and are identifying new growth opportunities and ways to build stakeholder value. I share their concerns on the recession’s impact on entrepreneurship and venture capital investment. Moreover, the results show that CEOs throughout the world want to do their utmost to contribute to the recovery and to be part of the solution.”

NYSE Euronext CEO Report 2010, Summary and Findings

Unlike prior surveys, the fifth annual NYSE CEO Report has one dominating theme which emerges on almost every question – the economy. The global economic crisis, combined with the ensuing credit crunch, has forced companies to make changes in many areas of their business. While economic difficulties in last year’s study were largely confined to the financial services sector, this year they affect companies in all industries, globally.

CEOs of U.S.-based companies are significantly gloomier than CEOs based at companies outside the U.S. This is sharply different from just two years ago, when 84% of CEOs at U.S.-based companies thought the U.S. economy was in excellent or good shape, significantly more positive than the evaluation of CEOs based outside the U.S. during the same time period. Additionally, there is a strong dichotomy of opinion concerning the appropriateness of government intervention in business – U.S. CEOs generally disapprove while their non-U.S. counterparts approve.
While companies are making budget cuts almost across the board, customer-relations and shareholder relationship management have remained much less affected. This would indicate the CEOs are taking a long-term view of the importance of these areas, regardless of the current financial restraints.

Highlights

Nearly nine in ten CEOs believe the global financial markets have performed poorly during the crisis, with nearly half saying they have performed very poorly. Large percentages seek restructuring or streamlining of the U.S. regulatory system, as well as easing of certain corporate governance rules in order to produce more stable and efficient global financial markets. A convergence of U.S. and international accounting standards is also high on the list of CEOs of non-U.S.-based companies, although it is less important to their counterparts in the U.S.
In spite of the downturn, most CEOs acknowledge their companies have gained some benefits from the downturn with larger market share, contract renegotiations and acquiring new employee talent among the most commonly mentioned positives.
There is a sharp difference of opinion between CEOs of U.S.-based companies and those outside the U.S. on government funding of companies during financial crises, with two-thirds of U.S. CEOs opposed and a similar percentage of those outside the U.S. supportive.
On what was the most important decision in helping guide their companies through the current turmoil, CEOs focused on reducing expenses and debt through a variety of means in order to strengthen their company’s balance sheet.
Similarly, when asked what change they would make to help their companies through future market turmoil, the most common answers revolve around controlling costs and debt and remaining highly liquid.

Business Opportunities and Challenges

Securing finance tops the list as the internal factor having a greater impact on revenue growth through 2010, with the strength of the management team a close second.
As was the case last year, operational efficiency and management stand out as the internal factors expected to have more impact on profitability. CEOs have downgraded the importance of new technology and products, partnerships and advertising/marketing.
The expected impact of compliance costs has declined by 22 points since 2006.
The expected impact of health-care costs have dropped 23 points in the past two years, likely indicating that CEOs believe they may have done all they can to reduce these costs.
CEOs view U.S. and global economic conditions as the most important external influences on their companies’ overall growth through 2010, with the proportion of CEOs who rank these as ‘much more important’ having increased markedly since last year.
CEOs think metrics related to company financial soundness, such as outstanding debt, credit ratings, and cash flow, are much more important to shareholders than they were three years ago while various types of growth (sales, operating, earnings-per-share) are less important.
Trends in interest rates continue to have the most influence on business planning, although CEOs are including a greater number of new measures than several years ago.
About eight in ten CEOs think M&A market opportunities are ‘exceptional’ or ‘good’ through 2010, with CEOs of companies based outside the U.S. particularly upbeat about M&A potential. One-fourth of CEOs see the M&A opportunities as ‘exceptional.’

Outlays and Expectations

Unlike previous years, when CEOs expected net budget increases for almost all areas, they anticipate net increases through 2010 for only customer-relationship management, healthcare, technology, environmental compliance and investor relations. The results for customer-relationship management and investor relations indicate that CEOs are thinking long-term and are aware of the importance of preserving goodwill toward their companies during lean times so they can capitalize on it in good times.
CEOs expect significant reductions in capital expenditures, raw materials, executive compensation and recruitment costs.
Compared with three years ago, CEOs say they are experiencing much more difficulty attracting and retaining investors, and slightly more difficulty doing the same with customers. Conversely, it is a buyers market for human talent.

Global Operations

As in previous years, the United States is the region CEOs most frequently cite as crucial for their business through 2010. The U.S. is followed by Western Europe and China.
Presumably due to the significant drop in international trade volume, far more CEOs than in previous years say their companies are unfavorably impacted by the global trade environment. As in previous years, companies based outside the U.S. are more influenced by the trade environment, which is currently affecting them very unfavorably.
About half of CEOs view emerging markets as an opportunity for their companies, while only 3% say they are threat. Of those who view emerging markets as opportunities, half are establishing or expanding local marketing and sales activities in these countries to maximize the opportunity, while most of the rest are investing in locally-owned facilities or partnering with local vendors.
About half of CEOs say their companies have moved operations offshore or did so in the past, little changed compared with two years ago. One-third of CEOs believe outsourcing offers less economic value than five years ago. CEOs of U.S. companies in particular think outsourcing offers less value, while those at companies based outside the U.S. are less convinced.

Corporate Governance

Half of CEOs say their companies have made changes to executive compensation plans in the past year, including over half of CEOs at U.S.-based companies. Far more have put in place cuts or freezes rather than increases in executive salaries, bonuses, raises and benefits and perks. The most common perks targeted for cuts or elimination are air travel expenses, club fees and memberships, pensions and auto expenses.

The CEO Role

After increasing for two years, the percentage of CEOs who think the CEO role is more rewarding plummeted this year by 22 points. Virtually all (98%) still think the job is more time-consuming.
Compared with three years ago, the largest percentage of CEOs say they are spending more time reporting to and working with their Boards. As in previous years, CEOs of U.S.-based companies report spending more time than their non-U.S. counterparts on regulatory and compliance issues, as well as executive compensation.

Corporate Social Responsibility

CEOs feel the most important corporate responsibility task is ensuring all labor practices are ethical across their organization, followed by formalizing policies related to corporate responsibility. The economy has affected which CSR actions CEOs think are most important, with ‘green’ practices and increased charitable giving falling down the list, while formalizing positions and policies has increased in importance.

Reputation

There has been gradual erosion in the percentage of CEOs who say they take as much action as they should to protect the reputation of their companies. This metric has fallen ten points since it was first asked in 2006.
Three in four CEOs think improved company practices and improved behavior of corporate executives are the best ways to ensure the ethical business behavior of senior corporate executives; only one in four think government involvement would have a positive impact. This is one issue where CEOs of U.S. and non-U.S.-based companies are in agreement.

Background on the NYSE Euronext CEO Report 2010

A record 284 CEOs, representing 23 industries and 24 countries, participated in the NYSE Euronext CEO Report 2010. Of that total, 195 responses were from the U.S.; 48 from Europe and the U.K.; 12 from Latin America; nine from the Asia-Pacific region; and 18 from Canada and Bermuda. One each was from South Africa and Israel. Some 18% of companies had $3 billion or more in market capitalization; 19% had $1 billion to less than $3 billion; 13% had $500 million to less than $1 billion; and 50% had less than $500 million. Opinion Research Corp., an independent global strategy and market research and consulting organization, conducted the survey via the Internet, phone and mail from March 5 to April 13, 2009.