articles | 03 September 2019 | EY Cyprus

EY: Companies need to change their corporate structure to meet tomorrow's challenges

Only one-third of CEOs (34%) believe the C-suite model is well-suited to the demands and opportunities of the next decade, according to the EY CEO Imperative Study 2019 which surveyed 200 CEOs, 100 senior institutional investors and 100 independent board members. However, CEOs and boards have been changing the face of the management model, with top positions added over the last five years including chief innovation officer, chief digital officer and chief strategy officer.

  • CEOs say the C-suite is not suited for the challenges of the next decade – changes planned
  • Institutional investors and boards support that corporate action is needed to solve top global challenges.
  • Cybersecurity, job loss due to technological change and income inequality are the top global challenges, CEOs report
But additions and changes to the C-suite are still being planned, with 72% of CEOs expecting to add positions or change roles on the C-suite and 82% of boards reporting the same. The top five new C-suite capabilities critical to company’s continued growth according to CEOs are: digital transformation (55%); innovation (53%); artificial intelligence (43%); data science (33%); and behavioral science (25%).

Institutional investors and boards support that corporate action is needed to solve top global challenges.

More than two-thirds (67%) of the world’s largest company CEOs say that they are likely to take public stands on politically charged issues related to global challenges, while at the same time, 76% of board directors and 79% of investors say they are likely to support a CEO taking a stand.

For the next five to ten years, CEOs around the world, recognize as global challenges that will threaten corporate growth and in turn the global economy, to be corporate cybersecurity, job losses from technological change, income inequality, the ethics around Artificial Intelligence as well as climate change.

57% of CEOs, 63% of board directors and 54% of investors believe it is in the best interest of large companies for CEOs to take a more active role on global challenges. The majority of CEOs (57%) see more opportunity than risk in taking action on global challenges and close to half of board directors (49%) and investors (42%) support this view.

At the same time, calls for the move towards inclusive and long-term growth are also starting to impact investment decisions as 60% of investors report supporting long-term investing to address global challenges, even when near-term performance may be diminished. A company’s stance and actions on global challenges is an increasingly important investment criteria, with more than half (55%) stating that CEO activism on global challenges have been occasionally taken into consideration for funding decisions in the last two years. Crucially, 83% of investors say that corporate stance/actions on global challenges will become a more important factor in decision-making over the next five years.

Global CEOs see growth upside of addressing global challenges

Board directors (58%), institutional investors (54%) and CEOs (51%) all believe to a great/very great extent that corporate action is needed to solve the top global challenges.

CEOs increasingly report that they are taking actions to address global challenges with the top actions reported being:

• 60% of CEOs say they have aligned their corporate purpose • 47% of CEOs have established partnerships with governments or NGOs • 45% have adopted a corporate reporting framework incorporating non-traditional concepts of value, and have participated in industry or cross-industry coalitions

Commenting on the survey findings, Stavros Pantzaris, Country Managing Partner of EY Cyprus noted: “All key stakeholders, including customers, employees and shareholders expect companies to take action as well as a public stand on global challenges, including cybersecurity, technology-induced job losses, income inequality, climate change and the ethics of AI. Addressing these challenges will boost the economy and business growth. However, the existing c-suite model will need to be adapted to enable companies to deal with these challenges effectively”.

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