Managing During Economic Turbulence

The fourth annual NYSE EURONEXT CEO SURVEY Reveals How Some of The World’s Most Influential Companies Are Navigating The Current Rough Waters.

Reporting by Susan Caminiti

In addition to the complexities that arise from running their businesses on an ever more international stage, corporate leaders are dealing with a soft and uncertain U.S. and global economy. Themed “Managing During Economic Turbulence,” the NYSE Euronext 2009 CEO Report captures the CEOs’ belief that, now more than ever, a solid back-to-basics strategy, coupled with innovative and clear-eyed leadership, is the best path to future growth. 

Smart leadership in tough times,say CEOs responding to the survey and in numerous related interviews, means a renewed focus on a strong balance sheet, sensible acquisitions, and attracting and keeping the best workforce around the globe. In fact the men and women running the world’s top businesses believe that these challenging times will ultimately separate the merely adequate companies from the great ones.

Still, the CEOs say, they have their work cut out for them. Nine out of 10 respondents to this year’s survey describe the U.S. economy as fair or poor. Just 10 percent of U.S.-based business leaders venture to call the economy good, and not a single one of them categorizes it as excellent. To put those numbers in context, consider that just last year, more than 80 percent of U.S. CEOs described the U.S. economy as good or excellent. And distance hardly dulls the painful perception. More than 90 percent of respondents from outside the U.S. call the American economy fair or poor.

Surprisingly, U.S. consumers — despite having their household budgets pummeled by rising food and gas prices — are more optimistic than the CEOs. In mid-March, an Opinion Research Corp./Caravan survey found nearly one in five respondents hopeful enough to label the U.S. economy as good or excellent, with 83 percent calling it poor or fair. Even that optimism may have tempered somewhat by May when a study by The Conference Board pegged U.S. consumer confidence at a 16-year low.

Andrew Liveris, chairman and CEO of THE DOW CHEMICAL CO. (DOW ), believes the “rising price of gasoline and food has reached the point at which consumers are being forced to change their spending patterns to get by.”

Back to Basics

A by-product of today’s turbulent times is greater difficulty attracting and retaining investors. Despite the fact that a higher percentage of respondents say it’s easier rather than more difficult to attract shareholders today, they are less confident than they were in either 2006 or 2007: In this year’s survey, nearly one out of three business leaders indicates that it has become more difficult to attract investors, compared with roughly one in five who answered that way last year.

Heads of financial services companies feel the most pain, with 45 percent indicating that it is harder to attract investors, compared with fewer than 20 percent from that industry last year. Overall, respondents believe consistency counts with investors. Kendall Powell, chairman and CEO of GENERAL MILLS INC. (GIS ), says his company’s formula of “consistent top-line growth and consistent earnings growth, coupled with dividends paid without interruption or reduction over the past 109 years, is a formula that investors clearly value.”

In the current environment, investors have shifted their focus to business metrics such as cash flow from operations and free cash flow, which are seen as more important to shareholders than stock price, according to the respondents. Keith Walters, chairman, president and CEO of ENNIS INC. (EBF ), a printing and apparel company based in Midlothian , Texas , says good cash flow and low debt have been his guiding principles for the dozen years that he’s run the company. “Our balance sheet looks good to investors now,” he laughs. “For Ennis, this attention to basics is a core value.”

Management Rules

A steady hand on the wheel and a sound plan for growth provide the best operating strategy in a bleak economy, the CEOs suggest. Management is a big part of accomplishing that goal, say nearly three-quarters of respondents, who expect their management team to be the internal factor with the biggest impact on revenue growth in the year ahead.

Other internal factors affecting revenue growth that rank near the top include new product development, brand strength, strategic partnerships and alliances, and new technology. Interestingly, last year’s respondents ranked new technology alone as the second greatest internal factor having an impact on revenues.

When respondents consider corporate profits, operational efficiency is the most crucial factor: More than four out of five business leaders believe that running a tight ship is the No. 1 factor affecting their company’s bottom line. They also give credit to the management team, new product development and new technology.

Issues such as compliance and health-care costs — anxiety-producing line items in years past — appear to be less of a concern for 2009. For instance, in 2006 fully 70 percent of CEOs said that compliance costs associated with the Sarbanes-Oxley Act and other governance initiatives would have an impact on corporate profits. This year it’s down to 47 percent. “The costs of Section 404 are embedded into most budgets for sure,” says Jim Noyce, CEO of life insurance holding company FBL FINANCIAL GROUP INC.(FFG ). “In fact, I think costs have gone down.”

The CSR Priority

While they are protecting their bottom line, business leaders also acknowledge their duty to carefully manage their companies’ effects on the communities in which they operate. For the first time, the report asks respondents to weigh in on corporate social-responsibility actions. A majority — 63 percent — say their companies need to ensure that all labor practices are ethical across the organization. More than one-third report that they are formalizing positions and policies related to corporate responsibility, and about 30 percent say they are initiating and sustaining “green” practices.

Indra Nooyi, chairman and CEO, PEPSICO INC. (PEP ), explains how doing well by doing good is simply smart business. Her company is not only reducing fat and calories in many of its snack food offerings in the hope of helping address the global obesity epidemic, but it has also put in place initiatives in Mexico , China and the U.K. that encourage exercise and healthy, active consumer lifestyles. “Keeping the focus on the heart and soul of our business — our products and the consumers who enjoy them — will remain the key imperative for us,” Nooyi says.

Embracing a Global World

As they look beyond their home base, CEOs are four times as likely to view the global trade environment as favorable rather than unfavorable. Michael Thaman, chairman and CEO of composite- and building-materials maker OWENS CORNING (OC), acknowledges that his goal is “to create value for our shareholders when and where we see opportunities around the world. That happens most quickly when the best technology, the best talent and the best manufacturing advantages are brought to bear on global markets.”

Among the global markets respondents most often address are the BRIC countries. More than half of the CEOs based in the U.S. say the economies of Brazil, Russia, India and China present opportunities, and close to 80 percent of CEOs based outside the U.S. feel this way.

Establishing or expanding local marketing and sales activity is, by far, the leading action CEOs say they will take in these countries. But, warns K.V. Kamath, CEO of ICICI BANK LTD . (IBN ), India ’s second largest bank: “Businesses have to adapt to operating in markets with very high growth rates. It puts a strain on manufacturing capabilities and demand for talent.”

Presidential Guidance

For the first time, NYSE Euronext conducted this survey in the midst of a U.S. presidential election campaign. Asked to offer guidance to the next commander in chief, 204 of the 254 respondents made some suggestions. One in four wants to keep taxes low or reduce them. Nearly one in five wants the next president to support free trade and reduce protectionism. “International trade is an economic powerhouse for the world economy and the American economy as well,” says Powell of General Mills.

One CEO writes: “U.S. consumers will buy the best product wherever it is made. This will be true even for the U.S. worker who complains the loudest about jobs being exported. Businesses must be permitted to compete without excessive government interference and must have access to all types of labor.”

“Let others build inexpensive cars and grow cheap corn,” suggests another CEO. “The U.S. should be about biotechnology, software, telecommunications, etc. Strengthen the U.S. ’s competitive advantages in high-tech by investing more in education and less in subsidies.”

Adds another CEO: “I would suggest that [the new president] better educate U.S. cit-izens on how the global economy affects every facet of our lives. We should at least have our eyes wide open as to which shortages or price spikes are self-imposed by not developing a resource, versus truly competing globally for resources not readily available in the U.S. ”

Owens Corning’s Thaman agrees. “I hope there is constructive dialogue between the next president and Congress on how to move forward with the creation of a true national energy policy,” he says. “This isn’t a partisan issue. It’s an American issue that needs to be addressed.”

Several CEOs also urged the next president to reach out to the business community for counsel. “Include as many views in your decision-making process as you can. Get the best business leaders in America to help staff White House and cabinet posts and make them be doers. There is a great deal that can be done,” wrote one CEO.

Job Satisfaction Up

CEOs say there is also a great deal that they, personally, can do in their capacity as business leaders in these challenging times. Respondents indicate that they’re working harder — but enjoying their jobs more than ever. Similar to previous years, 95 percent of responding business leaders indicate that their post is more time-consuming than it was three years ago.

Still, a growing percentage of respondents say that the work is more rewarding than it’s ever been: Fully six out of 10 report they love their jobs, compared with 45 percent in 2006. “Most CEOs get to their position because they are ‘can do’ people,” explains Jeffrey Resnick, president of Opinion Research Corp., which conducted the CEO survey for NYSE Euronext. “Running a business in difficult times is a challenge to them.” The positive emphasis is even greater among CEOs outside the U.S. , as 81 percent find their jobs more rewarding, compared with 52 percent of U.S. CEOs. Perhaps with governance reporting issues settling down and companies having addressed health-care concerns, executives can return to the responsibilities of management. Walters of Ennis doesn’t let the economic downturn affect how he views his role. “I grew up in a small farm town where there was either too much rain or not enough rain,” he says. “We had to grow crops in either scenario. Business is the same way.”

Jerry Grandey, president and CEO of Canadian uranium producer Cameco Corp. (CCJ ), acknowledges that it’s a difficult environment in which to be a CEO. “There are so many things to deal with — governance issues, environmental concerns,” he says. “I was talking to my predecessor about this recently, and he agrees it’s harder for me than it was for him. He’s happy to leave all these issues to me now.”

Michael Thaman, Owens Corning

How is your company coping with the falling dollar?

Growth in other parts of the world offsets the effects of a weakened U.S. dollar, says Michael Thaman, chairman and CEO of OWENS CORNING (OC). “Over the last decade, we have seen opportunities largely independent of what is happening with the dollar.” Noting that this maker of building materials, which had 2007 revenues of $5 billion, does business in 26 countries, he adds that “we go where the growth is. Countries such as China , Brazil , India and Russia and parts of Eastern Europe have good demand for our products and good economic development.”

Even more than a strong dollar, Thaman would like to see currency stability. “We’re not a big exporter out of the U.S. ,” he says, “but we would certainly like to see the volatility between the dollar and other currencies stabilize. That volatility does make planning more difficult.”

Over the past four years, Thaman says, Owens Corning boosted the share of business it does overseas to roughly 50 percent from about 20 percent. Recently, the company sold two U.S.-based construction-products businesses and reinvested the proceeds into its global composite-reinforcements business, which strengthened its presence in Russia , India and China . “A strong U.S. dollar benefits our company because it actually makes it less expensive to invest in other parts of the world relative to our global competition,” Thaman explains.

Thaman points out that he’s “quite comfortable with the business mix we have” and remains bullish on the U.S. The CEO expects to see rapid U.S. growth over the next three to four years as recovery takes hold in the home construction industry. Overseas, he points to Russia in particular. The country has “a very strong natural resource base, and the government has done a reasonably good job of using positive tax revenues to create investment in infrastructure,” Thaman says. “That economy looks like it has legs for a good period of time.”

Indra Nooyi, PepsiCo Inc.

What is the business case for corporate social responsibility?

A company can’t be successful in a changing world unless it views the world through the eyes of its many stakeholders,” insists Indra Nooyi, chairman and CEO of PEPSICO INC. (PEP ), which had 2007 revenues of $39.4 billion. Nooyi, who was born in India and became PepsiCo’s CEO in 2006 after 12 years with the company, meets the challenge through a strategy she calls “Performance With Purpose.” It’s a vision based on the belief that “companies must achieve financial success while also leaving a positive imprint on society,” she says.

For PepsiCo, corporate social responsibility (CSR) revolves around three areas: products, the environment and people. On the product front, the company’s mission is to make healthier snacks. Nooyi notes that nearly 45 percent of PepsiCo’s food offerings fall into either the “good for you” or “better for you” categories, which include products such as baked snacks, fruit snacks, veggie chips and fruit juices. That compares with the 1990s, when 100 percent of the portfolio was “fun for you” products. Ensuring that PepsiCo acts as “a responsible custodian of the environment and communities in which we operate” is the second leg of its CSR effort, Nooyi says. That means no matter where the company operates (40 percent of revenues come from outside the U.S. ), its goal is to leave as small a footprint as possible — ultimately seeking to have a “net zero” impact. For example, by 2010, the company’s Frito-Lay division plans to take its Casa Grande , Ariz. , factory off the power grid and run it entirely with solar energy. Management also hopes to use 100 percent recycled water for all of the factory’s processing. Finally, when it comes to people, Nooyi says, the goal “is to create an environment in which people feel good about coming to work; they feel engaged and are inspired. In a word, the goal is to ‘cherish’ our associates.”

Nooyi says she firmly believes that “business success cannot come at the expense of society, the planet or employees. If it does,” she adds, “then that success will be fleeting.”

Takeo Fukui, Honda Motor Co. Ltd.

What are the most pressing challenges that businesses face today?

The greatest challenge facing the automobile industry, and perhaps the single most important challenge of this generation, is the increasing threat of global climate change,” says Takeo Fukui, president and CEO of HONDA MOTOR CO. LTD . (HMC ), which reported fiscal 2008 revenues of $119.8 billion. “Reducing greenhouse-gas emissions requires solutions that extend far beyond the borders of any one country or industry.” Fukui believes that the efforts automakers undertake today will have implications not only for the ultimate survival of the planet but also for the survival of their companies in the near term.

Honda’s key to success, says Fukui , involves efficient use of personnel and material resources across its global operations, as well as maintaining a dynamic environment that encourages innovation. In 2006, Honda announced voluntary global targets for reducing greenhouse-gas emissions and promised to meet those targets by 2010. “Our goal is to produce the world’s cleanest, most fuel-efficient products at the world’s cleanest, most efficient factories,” says Fukui . To that end, Honda “established and funded an independent R&D organization with the freedom to pursue technologies that work toward this commitment.” The CEO insists that such a comprehensive approach is an advantage, not a threat to profitability. Investing in original technology has “enabled Honda to reduce our environmental footprint, while also satisfying our customers and shareholders,” Fukui says.         

In the near term, no single technology provides the answer, says the CEO. Honda continues to advance the conventional gasoline engine as well as hybrid, clean diesel and hydrogen fuel-cell technology. It is bringing out a succession of new models, beginning with the introduction of its FCX Clarity fuel-cell car in California this summer and a small hybrid vehicle next year. The bottom line, says Fukui , is that “we want our customers to continue to enjoy the essential pleasures of mobility while also preserving the environment for generations to come.”

Opportunities & Risks

Coping with challenges, identifying growth opportunities

Which internal and external factors have the most impact on growth and performance? Which areas will require budget increases? What economic indicators will most influence business planning?

The CEOs of NYSE Euronextcompanies may have identified the times as turbulent, but few are wringing their hands. They acknowledge that business success in the years ahead will be determined in large part by how well they navigate the rough terrain today. “There are always going to be changes in the economy — good and bad,” explains Ennis CEO Walters. “We get paid to run this company in all kinds of economic conditions.”

As in years past, the CEOs know that they can’t do it alone. When asked to name the internal factor with the biggest impact on revenue growth through 2009, nearly three-quarters cite their management team (see chart, p. 16). “We’re primarily a services company, so the ability of the management team to go out and sell to our customers is crucial,” says Phil Nolan, chairman, president and CEO of STANLEY INC. (SXE), an IT services and solutions company.

New product development, brand strength, strategic partnerships and alliances, and new technology make up the second-tier drivers of top-line growth. Nearly three out of five respondents say new product development is the key to revenue growth. Mikhail Shamolin, president and CEO of Russian mobile-phone giant MOBILE TELESYSTEMS OJSC  (MBT  ), says new calling features and advanced phone technologies keep his customers loyal. “They are always interested to see what we are going to do next,” he says.

CEO Andrew Witty says GLAXOSMITHKLINE PLC. (GSK) recently created a venture fund, meant to locate, develop and fund promising new science and technology that could evolve into new products for the company. The fund is casting a wide net. Witty says GSK will look for new ideas “no matter where in the world they are.”

Zeroing in on Differences

CEOs of companies based outside the U.S. view strategic partner­ships and alliances as well as sales and distribution channels as having a bigger impact on revenue growth than do their U.S. counterparts. However, regardless of their home base, CEOs from certain industries point to factors that make a difference. CEOs from consumer product companies and manufacturers, for example, indicate that new product introductions have more impact on top-line growth than does any other factor; in contrast, financial services and real estate firms reveal that strategic partnerships and alliances have the most impact on revenue growth.

Outside Influences

When it comes to external factors that will most affect corporate growth in the year ahead, it’s no surprise that nine out of 10 CEOs put U.S.  and global economic conditions, inflation and the cost of capital at the top of the list.

Regulation, energy prices and M&A activity make up the second-tier group of external factors that respondents feel will have an impact on growth in the year ahead. In particular, business leaders express concern about energy prices. Says Liveris of Dow Chemical: “The fundamental truth is that supply cannot keep pace with demand. In this environment, the world of alter­natives — wind, solar, nuclear and biofuels — becomes a huge opportunity.”

Executives of U.S.  companies are more likely to view political risk and legal expenditures as having a greater impact on overall growth than do non-U.S.-based CEOs, who cite global competition as having the greatest impact. The importance of raw-material prices has more than doubled since last year, although concerns still remain at a low level.

Mergers and acquisitions matter to all executives. Four of five respondents predict that M&A activity will affect their overall growthin the coming year, with 20 percent — a figure equal to those citing U.S. economic conditions — calling M&A the external factor with the most impact on their company’s growth through 2009.

Even so, only one in five believes company and industry growth will be driven mainly by M&A activity. A far higher percentage — nearly three out of five — say that their company’s growth will occur organically, and 23 percent say both will contribute equally.

Walters of Ennis says his company makes two to three acquisitions a year but indicates it may do more in the coming year given the economic climate. “When the hill is a little steeper for organic growth, we look for opportunities to buy companies offering complementary products that can be sold through our existing distribution channel.”

The Falling Cost of Compliance

Four out of five respondents cite operational efficiency as having more impact on their profits than in previous years; 72 percent indicate the management team had more impact. The cost of compliance — once deemed a huge threat to the bottom line — is now the top profit concern of only 8 percent of CEOs, down from 17 percent who felt that way in 2006.

  “When Sarbanes-Oxley first went into effect, no one knew how much they were going to have to spend and for how long,” says Nolan of Stanley. Since his company went public a little less than two years ago — well after SOX became a fact of corporate life — “I think things were easier for us,” says Nolan. “We saw how much other companies were spending and had a better idea of what it would cost us.”

Using the Indicators 

When asked to name the trends that most influence their business planning, 71 percent of CEOs point to the direction of interest rates, compared with 56 percent who felt that way last year.  Energy rates, foreign exchange rates, GDP , consumer prices and corporate profits make up the second-tier group of concerns.

Fully 62 percent of CEOs believe they will budget more for energy this year, up from 54 percent a year ago. Other areas where CEOs expect to increase spending include technology and raw materials.

Liveris of Dow Chemical believes a global surge in demand for commodities from rapidly growing regions such as China, India, Brazil and Russia is responsible for higher prices — not U.S. demand. “The U.S.  now faces the terrible combination of high and rising commodity prices — inflation — with low demand,” says Liveris. “It’s a situation we’ve not seen in the U.S. since the 1970s, and it makes for tremendous uncertainty.”

Just 49 percent of CEOs expect to increase the health-care budget, down dramatically from 66 percent in 2007. Part of the reason for such equanimity may be the dramatic rise in the number of employee wellness programs. This year some 72 percent of CEOs say their companies offer such programs. Says Ron Williams, chairman and CEO of health insurer AETNA INC.  (AET ): “Companies understand that it’s in everyone’s best interest to keep employees active and healthy rather than address their concerns only when they’re sick.”

Andrew Witty, GlaxoSmithKline PLC

How do you encourage innovation?

The question of how we ensure a flow of innovative products, year in year out, is the most important one for GSK’s future,” says Andrew Witty, CEO of pharmaceutical house GLAXOSMITHKLINE PLC (GSK).

Witty, who joined Glaxo in 1985 and became CEO in May of this year, says GSK restructured its R&D approach several years ago by creating Centers of Excellence in Drug Discovery — small, focused organizations resembling entrepreneurial companies with real accountability for moving ideas to viability. The concept was simple, he explains: Drug discovery “comes from individuals and teams working together in the laboratory, pursuing ideas and solving problems.” Citing the 157 projects in GSK’s pipeline, Witty reports that “we now have one of the — if not the — most productive pipelines in the industry.”

A particular danger in a company the size of GSK (which reported 2007 revenues of $45.4 billion) is that “bureaucracy, committees and standard operating practices can stifle creativity,” Witty adds. “So one of my priorities as CEO is to look at how we can further simplify our organization and empower our people — allowing them to feel that they really own their ideas.”

Further, Witty knows that all the best ideas aren’t always found in-house. “Sometimes innovation means acquiring promising companies, sometimes it means licensing and sometimes it means partnering with public and private research-based organizations,” he says. “You can, through constant striving, build a truly innovative organization by understanding what motivates people, by being open-minded about whom you work with and new ways of working, and by creating an organization that embraces change.”

Mikhail Shamolin, Mobile  Telesystems OJSC

What will be your approach to M&A in the coming year?

In May, when Mikhail Shamolin took over as president and CEO of Mobile Telesystems OJSC (MBT ), the largest mobile-phone operator in Russia  and the Commonwealth of Independent States (CIS), the company had already bought more than a dozen companies over the prior decade. Shamolin, who joined Mobile Telesystems in 2005 and was educated at the Russian Academy of Government Service before working at McKinsey & Co. from 1998 to 2004, looks to a robust M&A strategy over the next several years to support the company’s growth. With 2007 revenues of $8.2 billion, the company serves more than 85 million subscribers out of the 230 million customers in the markets in which it operates, according to Shamolin. Mobile Telesystems estimates that the market growth in the CIS region — Russia , Uzbekistan , Turkmenistan and Ukraine — will be 140 percent between 2006 and 2012.

With three to four independent mobile operators in most CIS countries, Mobile Telesystems’ M&A strategy is clearly defined, he explains. The company targets players that use the GSM (global system for mobile communications) standard, have enough scale to meet its financial metrics and are market leaders in their regions. Shamolin adds that mobile operators in the CIS are “extremely innovative and have a lot of influence on the population. These companies are always a couple of steps ahead of what people expect in telephony. Mobile operators are the drivers of the new Russian economy.”

Shamolin indicates that expansion into new regions such as North Africa  and Southeast Asia  is not on the radar right now. “We would need a cluster of companies or one big purchase outside the CIS to meet our need for synergy and scale,” he says. “The Russian media always ask who we will buy next,” the CEO laughs. “I always tell them the rumors about operators we want to buy in the CIS are usually true. But rumors about companies we’re buying outside the CIS are most likely false.”

Ronald Williams, Aetna Inc.

What are the most effective ways to deal with rising health-care costs?

The U.S. spends about $2.3 trillion a year on health care, and premium increases are outpacing the growth in workers’ earnings and inflation. That, insists Ronald Williams, chairman and CEO of Aetna Inc. (AET ), the health-care insurer with 2007 revenues of $27.6 billion, means it’s time for CEOs to take charge. “Health-care cost management is typically delegated to someone far below the folks in the C-suite and doesn’t get the attention it needs as a critical business issue,” says Williams. He proposes a trio of solutions to help rein in skyrocketing health-care costs.

The first step, Williams says, involves integrating medical, dental, pharmaceutical, disability and behavioral health-care coverage rather than searching for the lowest-price vendors for each. He explains that an insurer that provides both medical and mental-health services would know to screen a patient for depression and heart disease, for example.

Employees, too, need to be part of the solution, Williams says. Online information and incentives for taking health-risk assessments are some of the methods companies are using to help workers stay healthy. Williams says Aetna  held its internal medical-costs increase to 3.3 percent last year — far below the national average — by emphasizing wellness programs. Aetna  ’s 35,200 employees, he says, can earn up to $600 in incentives by participating in a “Healthy Lifestyles” program that includes fitness, nutrition and taking a health-risk assessment.

Finally, there’s the role of technology. The U.S.  is woefully behind the times in connecting patient data electronically. CEOs, says Williams, should make technology part of their purchasing criteria when looking for health-care coverage. “Health plans have to play a leading role in technology,” he says. “We collect the data and can find the gaps in care that will help take costs out. But doctors, too, have to get more comfortable with technology, and business leaders have to see that information technology, along with employee involvement, is the best hope we have of getting costs under control.”

Stakeholders

Serving investors, employees and customers

Is it easier to attract and retain investors, employees and customers than in the past? What metrics do investors look for? Which factors most influence employee retention? How can companies ensure customer satisfaction?

Attracting and retaining key stakeholders in the midst of a robust economy is hard enough. Doing it during these uncertain times, say business leaders, presents an even greater challenge. Still, more CEOs feel that, compared with three years ago, it is easier to attract customers, employees and investors. Keeping investors, however, is proving to be a bigger battle. A third of respondents feel it’s more difficult to retain investors, up from 19 percent who felt that way in 2006 and 22 percent last year.

CEOs of financial services companies are feeling the most pressure when it comes to shareholders. Fully 45 percent of these business leaders say that, compared with three years ago, it’s more difficult to attract investors, compared with 19 percent of financial services CEOs who felt that way last year. More than half of financial services CEOs (55 percent) say it’s harder to keep them, compared with 21 percent last year. Resnick of market research firm Opinion Research Corp. says the mood is understandable: “Investors are looking at financial services companies and asking, ‘Where was the enterprise-risk-management strategy?"

Given the times, CEOs say shareholders are weighing certain financial metrics differently, apparently looking toward the financial stability of companies in which they invest rather than the prospects of stock appreciation. Three out of five say cash flow from operations is more important to investors today than three years ago, compared with just 47 percent in 2007. Also more important are free cash flow, say 55 percent of CEOs, credit ratings (28 percent), total debt outstanding (35 percent) and liquidity of assets (25 percent). Dividends and dividend growth matter less to shareholders, say 18 percent of CEOs.

Happy Customers

With customers weighing purchases more carefully in an atmosphere of job layoffs, soaring fuel and food costs, and a rocky housing market, CEOs indicate that it takes more to attract and keep customers, even the wealthy ones. “The global economic picture means that while the affluent still continue to travel as much as ever, they demand value for their money,” says Paul White, president and CEO of ORIENT-EXPRESS HOTELS LTD. (OEH ). “This, added with ever greater competition, makes customers even harder to attract.”

That said, 35 percent of CEOs say they devote more time to customer relations than they did three years ago and half say they are budgeting more hours for customer-relationship management. Interestingly, 64 percent of non-U.S.-based CEOs, versus 45 percent of their U.S. counterparts, say they will pay more attention to customer relations in the coming year.

Jim Prieur, CEO of health and life insurance provider CONSECO INC. (CNO ), insists that understanding customers is the best way to keep them loyal. “When you define your market and figure out their needs, it’s much more effective than coming up with new products and trying to find the market,” he says. “Everything we do has to start with the customer in mind.”

The Talent Challenge

Despite the softening U.S. economy, business leaders say finding and keeping top-notch talent continues to challenge them, though not as fiercely as it did in years past. More than one-third of CEOs say it’s easier to attract workers, while only one in four says it’s harder to keep them. “Recruitment is always difficult,” allows Stanley ’s Nolan, but he is finding it a little easier lately, a development he attributes to the amount of layoffs occurring.

More than 80 percent of U.S.-based CEOs and 75 percent of their non-U.S.-based peers suggest that good management has more impact on employee retention than three years ago. Business leaders also cite internal employee training and development programs, cash bonuses and stock incentives as company offerings that will keep workers from leaving.

Size seems to dictate which perks CEOs believe will help them hang on to talent. The heads of companies with market caps of $1 billion to $3 billion say good management and stock incentives keep folks from leaving, while CEOs from companies valued at $3 billion or more believe good management and social responsibility and diversity initiatives play important roles.

The Health-Care Dilemma

With CEOs reporting that they are less concerned with health-care costs than in years past, fewer are increasing employee deductibles. In fact, the percentage of respondents who have hiked deductibles has dropped to 58 percent this year from 80 percent in 2006.

Perhaps the biggest change over the past two years in the area of employee health is the percentage of companies that offer corporate wellness programs to keep costs in check. Seven out of 10 CEOs say workers have access to wellness programs (such as weight loss and smoking cessation programs, health risk assessments, fitness facilities and disease management programs). Noyce of FBL Financial says he has led employees on the one-mile walk around the lake at his company’s headquarters to promote the benefits of physical activity. “A good percentage of the company participates,” he says. “We may have more claims for sprained ankles and sports injuries, but I do believe overall our employees are healthier.”

Clarence Otis, Darden Restaurants Inc.

What are the most effective ways to attract and retain employees?

In 1938, when DARDEN RESTAURANTS INC. (DRI ) founder Bill Darden opened his first restaurant, he called his employees “our greatest competitive edge.” Now, 70 years later, current chairman and CEO Clarence Otis says this belief still guides how the company attracts and retains employees.

Darden, which last year posted $5.6 billion in sales, says it takes “a holistic approach” to maintaining its talent. At the center of that approach, explains Otis, are two key aspirations: making Darden financially successful and keeping it a special place to work. “People want to be part of a winner, and Darden’s mission is to be the best full-service restaurant company now and for generations,” says Otis. “And to be the best, you’ve got to attract the best.”

Operating six restaurant concepts (Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52) enables the company to offer employees a variety of work settings. This variety helps Darden attract workers with different backgrounds and talents while increasing the chances of qualified candidates finding the right career path, Otis says.

Darden maintains a thorough talent review process that helps put people in the right jobs, recognizes them with “an appropriate and competitive reward system,” and provides a series of jobs to which each can aspire, says Otis. The company has a general manager or managing partner for each of its 1,700 restaurants. It is a premier position, says Otis. “Each is respon­sible for the day-to-day operations of our restaurants, each one of which is a multimillion-dollar business,” he says. The CEO notes that the company is so confident in its selection of the right candidates that 99 percent of them are promoted from within. “Having the right people in the right positions and providing a clear career path,” says Otis, “will help us reach our goals of being a winning organization financially and a special place to work.”

Paul White, Orient-Express Hotels Ltd.

How do you make customer satisfaction a priority?

Customer satisfaction, says Paul White, president and CEO of ORIENT-EXPRESS HOTELS LTD . (OEH ), goes beyond simply making people happy. It means giving guests the “experience of a lifetime and, in turn, inspiring them to return to Orient-Express.” The company, with 2007 revenues of $599.6 million, owns or invests in 51 luxury hotels, restaurants, tourist trains and river-cruise businesses in 25 countries. White believes that the key to satisfying customers, particularly in the luxury market, is staff. “From the first phone conversation with a sales representative who really listens and understands the product, through the entire travel experience,” White says, well-trained staff can make a guest’s stay.

To ensure the best possible customer experience, the company empowers general managers. “Luxury is a personal thing, and the only way to satisfy guests is to discover their personal needs and tailor as much of the experience as you can to their preferences,” White says. For instance, one guest’s perfect night might be to dine in a hotel’s main restaurant, while another may prefer “to be ensconced in their suite, not disturbed by room service, the valet or housekeeping.”

To help turn guest preferences into reality, White says, the company allows general managers to run their property as if it were their own. “This instills a sense of personal pride, which is reflected in their team,” he says. Orient-Express also has a rigorous quality-assurance program, which regularly reviews each hotel against a comprehensive set of criteria, using anonymous guests as inspectors, White explains. “Detailed feedback from these assessments allows us to pinpoint accurately which aspects of service delivery we need to focus more training on,” he says.

White encourages employees to visit other Orient-Express properties to experience different methods and cultures. He adds: “Each hotel or train experience is designed with an authentic local spirit of place, and the only way to understand that culture is to envelop oneself in it.”

Governance

The CEO role, compliance and reputation

How has the CEO role changed? Are boards effective? Are CEOs satisfied with the compensation process? What changes would improve the capital markets? Do CEOs do enough to safeguard their companies’ reputations?

Despite the turbulent economy, 60 percent of CEOs of NYSE Euronext companies find their job more rewarding today than they did three years ago. That’s up from 53 percent in 2007 and 45 percent in 2006.

Resnick from Opinion Research Corp. suggests that one factor contributing to job satisfaction is the decrease in the time business leaders are spending on compliance and regulatory matters. With the Sarbanes-Oxley Act (SOX) more than six years old, CEOs say their compliance requirements are well understood and firmly in place. As a result, just 56 percent of respondents say they are allocating more time to regulatory and compliance issues compared with three years ago, versus 89 percent in the 2006 survey. “Any changes in governance requirements at this point are marginal at best,” says FBL Financial’s Noyce.

Where the Time Goes

That’s not to say that the company executives aren’t working hard. Fully 95 percent of respondents indicate that they are putting in longer hours than they did three years ago, a percentage virtually unchanged since NYSE Euronext began asking the question in 2005. Instead of dealing with regulatory and compliance issues, however, a growing percentage of CEOs say they are focusing on board issues, shareholders, customers and media relations. More than 60 percent say they spend additional time on investor issues, and more than one in three devotes greater attention to the customer. More than three out of five say they are spending more time on setting strategy.

Geography makes a noticeable difference in how business leaders allot their time. Nearly 70 percent of U.S.-based CEOs say reporting to the board takes more time, compared with just under half of non-U.S.-based respondents. Regulatory issues and executive compensation matters also take up more of a U.S.-based CEO’s time.

Harmony With the Board

The relationship between CEOs and their boards remains positive, say nearly 90 percent of respondents. With greater clarity regarding SOX requirements, 95 percent say the expectations of directors concerning their depth of information has increased, and three-quarters view boards as excellent sources of advice. Some 59 percent say they’re satisfied with the board’s level of insight regarding global issues their companies face.

Nolan considers his directors a “valuable sounding board” since Stanley went public in 2006. “After the IPO, our directors got up to speed quickly on governance and compliance issues,” he recalls. Nolan was also impressed at how proactive the board was in seeking out director-education programs.

Interestingly, CEOs who report that they find their job more rewarding than it was three years ago are more likely to say they have a positive relationship with their board. More than 80 percent of respondents who find their job more rewarding agree that their board is well informed on the key issues that have an impact on their company versus 68 percent who find their job less rewarding.

The survey shows a correlation between job satisfaction and how the respondents view their executive compensation process (see chart, next page). Seventy percent of CEOs who say their job is more rewarding than in the past are satisfied with how executive pay is figured at their companies, compared with 30 percent of respondents who find their job less rewarding.

Fully 92 percent of all respondents — 95 percent of U.S.-based CEOs and 84 percent of their non-U.S.-based peers — turn to overall company profitability in order to compute their executive bonus plans. Less than half that many (47 percent of U.S. CEOs and 29 percent of their non-U.S. counterparts) base bonuses on company revenue and revenue growth. Diversity initiatives are a more important component for CEOs based outside the U.S. , but 10 percent of American respondents volunteered that return on capital was also a contributing factor to executive bonus plans.

Making U.S. Markets Competitive

In the midst of a presidential campaign, CEOs have strong thoughts on what will affect the competitiveness of U.S. markets. The majority say changes to the U.S. legal and regulatory systems will help, a finding similar to last year’s. However, compared with last year,fewer (79 percent versus 88 percent) think that easing governance rules or changes to certain government processes would have a positive impact. Sixty-five percent of respondents feel that a convergence of international account­ing standards would aid U.S. capital markets. Nearly 80 percent of CEOs of non-U.S.-based companies indicate it would be a plus, compared with only 59 percent of their U.S.-based counterparts.

Still, many respondents to the survey acknowledge that U.S. governance standards give shareholders a sense of comfort. “We listed on the New York Stock Exchange instead of, for example, on our local Greek exchange purely because of the more stringent governance, which creates greater investor confidence, in turn increasing valuations,” John Coustas, president and CEO of shipping company  DANAOS CORP. (DAC), noted during a roundtable discussion on the topic of global competition that was held at the Paris headquarters of NYSE Euronext in May.

Regarding their personal experiences as board members, half of U.S.-based CEOs and 21 percent of respondents outside the U.S. indicate that they’ve declined board seats at other companies, perhaps because of the added demands directors face in a post-SOX world. Thirty percent of non-U.S-based leaders say they’ve sought the removal of an underperforming director, compared with just 23 percent of U.S. respondents. Fewer than 10 percent of all respondents — regardless of their home coun-try — have sought to remove the CEO of an outside company on whose board they serve.

More than half say sustainable growth is most crucial to a CEO’s long-term success. Just 17 percent cite stock appreciation, 16 percent point to customer satisfaction and 5 percent say employee satisfaction will define their reign.

The Reputation Divide

Fully 78 percent of CEOs feel they do all they can to protect their company’s reputation, but that’s down from 81 percent last year and 84 percent in 2006. Nine of 10 manufacturing company CEOs say they take enough action to safeguard their company’s good name, compared with just 73 percent of financial services leaders and 65 percent of energy company executives.

In contrast, nearly half of U.S. adults say CEOs don’t do enough to protect corporate reputations. Resnick of Opinion Research Corp. says a “significant trust chasm exists between the public and corporate leadership today” and that a large number of Americans believe that “those at the top are not worthy of their trust.”

Further, more than half the Americans who feel that ethical business practices have increased in the past two years credit better government oversight. However, nearly 70 percent of U.S.-based CEOs and 62 percent of non-U.S. CEOs cite changes in company practices and better behavior at the top as responsible for the improvements.

Conseco’s Prieur says there’s no room to abuse trust. “The first time you tell [stakeholders] a lie, they’ll figure it out and then it will be harder to get them to trust you next time,” he says. “Tell the truth in good times and bad. People can be quite forgiving if they feel you’re being straight with them. That kind of goodwill can carry a company through a lot of rough times.”

Antonio Perez,  Eastman Kodak Co.

How does the ceo role today compare with that of the past?

Although Antonio M. Perez, chairman and CEO of EASTMAN KODAK CO. (EK), asserts that “fundamentally, the role of CEO has not changed — it’s all about delivering results,” he acknowledges two seismic shifts that have rocked the corner office: globalization and technology. Since joining Kodak in 2003 and becoming CEO in 2005, Perez has helped transform a film-based business into a company that derived nearly 70 percent of its 2007 $10.3 billion revenues from digital products. New products include digital plates and printing systems for the printing industry, consumer ink-jet printers, sensors for digital cameras and mobile phones, and retail kiosks for printing digital photos. Further, since Perez joined Kodak, the employee count has dropped to about 27,000 from 64,000, and just three plants make film and photographic paper, down from 14.

Leading a global company through such wholesale change, says this native of Spain  , requires discipline, focus and the ability to foster a productive relationship with the board of directors — traits CEOs have considered essential for decades. There will always be, he says, “an ongoing parade of decisions regarding resource allocation, organizational structure and alignment, and investing in or divesting businesses.” The CEO’s role, Perez says, is to ensure that strategy and results are in sync.

The difference now, Perez insists, is that when changes in corporate strategy occur against the backdrop of technology, “decisions are made faster, feedback comes faster and market changes march quickly across every global region.” Kodak now generates nearly 60 percent of revenues outside the U.S. Still, CEOs — no matter where their companies do business — “have instant access to a wealth of information to enable them to make the rapid-fire decisions required in today’s blazing-fast pace of change,” he adds. And while Kodak’s CEO sounds like a man who enjoys the fast lane, it’s only natural to wonder if the velocity required by today’s top executives exacts a toll not demanded of their predecessors. Indeed it does. Says Perez: “I have to be available at all times.”

Daniel Amos, Aflac Inc.

How do you align executive pay and shareholder interests?

In May AFLAC INC. (AFL ) became the first major U.S. corporation to put executive pay to a shareholder vote. More than 93 percent of investors at the company’s annual meeting approved the formula that resulted in an $11.96 million compensation package last year for longtime Chairman and CEO Daniel Amos. The vote was nonbinding but underscored what Amos describes as Aflac’s philosophy of establishing “clear links between compensation and management’s ability to deliver on corporate financial goals.”

The Columbus, Ga.-based company, with 2007 revenues of $15.4 billion, provides supplemental insurance to 40 million people worldwide. When a shareholder approached the company in 2006 with the “say on pay” proposal, Amos brought it to Aflac’s board, whose members agreed it was a good idea. “By directly aligning compensation with achievement of key business drivers, such as pretax operating earnings, new annualized premium sales and expense growth,” Amos explains, “executives, and all Aflac employees, have the potential to earn incentive bonuses in years when the company has a strong performance. Conversely, missing goals will result in no or lesser incentive compensation.”

Amos also views equity ownership as an important tool for matching executives’ compensation with shareholder issues. All officers and directors are required to own Aflac shares. Through December 2007, reported total return to investors, including reinvested dividends, exceeded 3,867 percent in the 18 years that Amos has been CEO, well above the 660 percent recorded by the Dow Jones industrial average and 549 percent for the S&P 500 over that same period. 

Overall, Amos, the son and nephew of Aflac’s three founders, insists that the best
way to keep compensation and shareholder interests in sync is through transparency and
shareholder empowerment: “These are two concepts that Aflac has firmly embraced.”

Jim Prieur, Conseco Inc.

What does it take to rebuild a company’s reputation?

By the time Jim Prieur joined CONSECO INC. (CNO ) in 2006 as CEO, the U.S.-based health and life insurance company had already weathered lawsuits against former executives and directors to recoup $650 million in loans, the arrival and departure of four CEOs in six years, a settlement with the SEC over market-timing allegations and a bankruptcy. Prieur says he realized that repairing Conseco’s tattered reputation would require “a clear assessment of where we were and a clear understanding of where we wanted to go.” 

Prieur and his top lieutenants began by defining Conseco by the market it serves, not by a set of products, as most insurers do. Aiming squarely at middle-income, working Americans and retirees, says the CEO, allowed employees to focus on the best fit of products for this demographic, such as supplemental health insurance and annuities for retirement.

With that foundation, Prieur talked to employees about integrity, teamwork, customer focus and vision. He tapped into his 25 years of experience in the insurance industry and personally recruited management talent to supplement the team in place. “The people who stayed and the ones joining all have this intense desire for the turnaround to work,” Prieur says.

Customer service topped Prieur’s agenda. “A good customer experience — courteous service, an easy and quick claim — is the single biggest thing that affects reputation,” he says. “A positive experience is 10 times as important as anything that customers might read or hear about the company.”

For investors, Prieur vowed transparency, candor and consistency — in good times and in bad. “We did a major shift in our operational focus and took a lot of costs out,” he says, “and we did it within my first year. I saw how important it was to approach problems with the same face — not too enthusiastic when things go well, or too upset when they don’t.”

Global Operations

One world, many markets

Is the global trade environment favorable for business? Are the BRIC countries an opportunity or a threat? What is the best strategy for entering emerging markets? Which countries provide the most opportunity for growth?

Viewing the entire world as their potential marketplace, many of the survey respondents say that creating a borderless business environment is of paramount importance as they conduct business in the years ahead. In fact, “The debate about globalization is, in a sense, over,” acknowledged John McMahon, CEO of aircraft lessor GENESIS LEASE LTD. (GLS) during the recent NYSE Euronext round­table discussion in Paris . “In the 1980s, there were closed areas of the world — China, the Soviet Union — but for the most part, that situation no longer exists,” he notes. “Now companies must focus on how to add value in and be competitive on a global basis.”

Many of the respondents to the 2009 CEO report apparently agree. Of the 204 responses to the question “What guidance would you offer the next U.S.  president?” one out of five specifically cites expanding trade or reducing protectionism. “The new president must focus the country on the fact that America is a huge beneficiary from world trade,” one CEO writes. “Our focus has to be on how we can compete effectively, not on protecting ourselves from competition. Protectionism has never worked and will be even less effective in the Internet era.”

“Be a free trader,” writes another survey respondent. “Don’t allow Congress to engineer markets and industries. Do what is right versus what is politically expedient.”

The policies of the next U.S.  administration are important, of course, since U.S.-based and non-U.S.-based companies alike consider  America their most important growth market. Nine out of 10 survey respondents cite the U.S. as an important or crucial venue for their businesses, with two-thirds calling it their most important market. China tied with Western Europe for a distant second place, with 9 percent of all CEOs calling those regions their single most crucial.

“The U.S.  sets the standard in terms of access to labor, access to market and access to capital,” observes Dow Chemical’s Liveris. “Those three elements have ensured a dynamic U.S. economy for more than 100 years.”

While 82 percent of U.S.  respondents view their home country as the most important region for the coming year, just 21 percent of non-U.S. CEOs put the U.S. in first place, ranking it not far above Western Europe and Brazil . China tied with Mexico for fourth place among non-U.S. CEOs, with 13 percent listing each country as the most important region.

The Value of BRIC

Nearly two-thirds of business executives view Brazil , Russia, India and China as opportunities. More non-U.S.-based respondents (79 percent) than their U.S. counterparts (57 percent) see promise within the BRIC regions, and just 3 percent of all CEOs — regardless of where they are from — regard those countries as any kind of threat.

However, just 9 percent of U.S.-based executives view BRIC countries as their most important markets, far below NAFTA, which rates an 83 percent approval rating. More than three times as many non-U.S.-based respondents say the BRIC countries will be the most important regions for their company’s growth.

Establishing or expanding local marketing and sales activity is how nearly half the CEOs plan to maximize the opportunities they envision in BRIC countries. One-quarter of survey respondents will search out, or expand, local partnerships, including outsourcing arrangements, and 22 percent of the business executives expect to invest in wholly owned local facilities in the coming year.

Mobile Telesystems CEO Shamolin cites a $20 billion mobile-phone market in Russia and the Commonwealth of Independent States (CIS). Noting that the market is expected to see triple-digit growth by 2012, he says that MTS can expand comfortably without looking elsewhere. “Mobile-phone companies are the most popular brands in our part of the world,” Shamolin points out. “They are recognized and trusted by Russian consumers, which gives us a lot of influence and potential to grow. We are very much Russia- and CIS-focused now.”

Owens Corning’s Thaman is equally enthusiastic about Russia . “The economy there is growing, and that means the infrastructure is being built up to meet the needs of the middle class,” he observes. “These folks want better roads, better houses, and lower-cost and more available energy. Our composite- and building-materials businesses will benefit from that kind of building.”

India and China B eckon

Emerging markets hold great promise for those companies nimble enough to meet the needs of their diverse populations. ICICI Bank CEO Kamath offers rural India as an example. Since the people who live in many regions of the country are poor, he explains, they can’t afford to buy personal-care products such as shampoo in the eight-ounce bottles manufactured by most consumer-goods companies. However, the companies that sell single-use shampoo packets for about 5¢ “are having great success in rural India ,” Kamath notes. “These companies are repackaging their products to meet the needs of a new market, rather than expecting the market to adapt to them.”

For many survey respondents, China  remains the most exciting market now and for years to come. “It has broken through the barrier and is now on a trajectory that will see more and more people move out of poverty to become consumers over the years ahead,” Liveris says.

“China  isn’t emerging as a power for any unknown reasons when you look at competitive forces,” McMahon adds. “It offers low costs, and they’re getting smarter and smarter about their businesses. I think you will see many organizations in India , China , Brazil and elsewhere coming into a more competitive arena on a global basis because they’re focusing on the fundamentals of competition.”

Trading Places

Beyond establishing footholds in new marketplaces, business leaders are optimistic about the global trade picture. CEOs are four times as likely to describe the impact of the global trade environment on their business as favorable rather than unfavorable. That’s down slightly from last year, when 48 percent of CEOs categorized global trade as either favorable or extremely favorable, and 11 percent of survey respondents called it unfavorable or extremely unfavorable.

Size and geography affect the lens through which CEOs view the global trade landscape. Sixty percent of respondents running companies with a market cap of $3 billion or greater say the impact of the global trade environment on their business is favorable, with just 35 percent calling it neutral. Fifty-five percent of non-U.S.-based CEOs call the trade outlook positive, compared with just 35 percent of U.S.-based firms. Fewer than 15 percent of all respondents — no matter the size of their companies or where they are based — feel the global trade environment is unfavorable.

“When business leaders talk about globalization and the new marketplaces, sometimes they focus too heavily on the constraints,” said another participant in the NYSE Euronext roundtable, Jean-Luc Bélingard, chairman and CEO of IPSEN (Euronext: IPN), a Paris-based pharmaceutical developer. “But diversifying your portfolio of geographies helps balance risks. Ultimately, operating in a global market is a great opportunity.”

Jerry Grandey, Cameco Corp.

What are the elements of a global risk-management strategy?

Whether making formal presentations to the 2,700 company employees around the world or chatting with visitors at drilling sites in central Asia, Australia or the U.S., “I talk about the need to manage risk to the point where I get tired of hearing myself,” laughs Jerry Grandey, president and CEO of CAMECO CORP. (CCJ ), the Saskatoon, Canada-based uranium producer with 2007 revenues of $2.3 billion. But repetition, he says, “tells people that if the CEO is spending this much time talking about risk management, then it must be important for the company. And it is.”

The first step in dealing with either opportunities or challenges, believes Grandey, is training. “We train our people to evaluate situations, business opportunities and transactions through the lens of risk,” he insists. For Cameco that means recognizing not only financial risk but also what Grandey describes as in-country risk, including the political, social, operational and environmental dimensions of any partnership or contract it enters into. Using an enterprise risk-management system, Cameco ranks each country in which it does business by the probable risks it might encounter. Grandey, who joined the company in 1993 and became CEO 10 years later, says the practice allows Cameco to assess the fallout from a variety of scenarios, including loss of production, impact on reputation, financial consequences and customer impact. Employees who work overseas get additional training in foreign practices so that if faced with an ethics issue — bribery or a potential safety violation, for instance — they can respond appropriately. 

Grandey admits that Cameco’s procedures “might sound a little bureaucratic, but we don’t want folks trying to decide on the fly how to respond to risks they might face. They just know, for example, that when it comes to managing a workforce in any part of the world, everyone is going to wear safety glasses, hard hats and steel-toed shoes, and that the standards of construction are going to be up to Western standards. That’s just the way we manage and mitigate risk.”

K.V. Kamath, ICICI Bank Ltd.

What challenges exist in doing business in bric countries?

Any company steeped in past success is going to find it difficult to compete in BRIC
countries,” says K.V. Kamath, CEO of ICICI BANK LTD . (IBN ), India’s second largest bank, with total consolidated assets of $121 billion as of March 31, 2008.

In India , for instance, the CEO points to “a large number of people entering the job market,” but notes “many lack the skill set to succeed.” Kamath wants companies to make their training accessible online and share it with India ’s training institutes, which can use the information to supplement classroom teaching. Kamath recalls that last year ICICI sifted through about 750,000 résumés to find 17,500 qualified candidates. Increasing the base of skilled workers keeps attrition under control as employees realize they have competition for jobs. It also helps keep wages in check as employers have a bigger pool of qualified workers from which to choose.

Global companies also need to find imaginative ways to harness the power of technology outside the main cities, Kamath says. Noting that the average bank deposit in rural India  might be $100, compared with $1,000 in more urban settings, he adds: “The question becomes, how do you make money with a $100 deposit? You can’t build a branch because you won’t make your investment back. Even having an ATM machine is probably too expensive.”

ICICI Bank, says the CEO, is partnering with nongovernmental organizations and local cooperative credit societies in India’s villages to distribute the bank’s smart cards, which allow customers to do basic banking without the need of a branch or ATM. “We’re leapfrogging available technology to find ways to make a banking transaction affordable for the rural customer and worthwhile for us,” Kamath says. “This population segment exists in all the BRIC countries, so the companies that want to operate in these parts of the world have to be nimble. They have to have the mindset that business has to be done in a different way in order to be successful.”

Methodology

In 2008, Time Inc. Content Solutions, on behalf of NYSE Euronext, commissioned Opinion Research Corp., an independent global strategy and market research and consulting organization, to conduct the NYSE Euronext 2009 CEO Report, the fourth annual survey of CEOs of listed companies. A questionnaire was administered via the Internet, phone and mail from Feb. 29 to March 31, 2008  , generating 254 responses from leaders in some 20 industries and 18 countries. Of that total, 184 responses were from the U.S.; 39 from Europe and the U.K.; 16 from Latin America; 10 from the Asia-Pacific region; and five from Canada and Bermuda. Some 26 percent of companies had $3 billion or more in market capitalization; 34 percent had $1 billion to $3 billion; and the rest had less than $1 billion. Although the respondents reported a median CEO tenure of seven years, 22 percent had been in that position for less than three years, and 25 percent for 10 years or longer.

An additional Opinion Research Corp./Caravan survey conducted to include comparisons of the American public’s sentiment polled 1,005 U.S. adults from March 14–17, 2008 and 1,009 U.S. adults from May 16-19, 2008.