PWC’s 25th annual CEO survey focused on “the power of trust.”
We found that highly trusted companies are more likely to have made net-zero commitments and to have tied their CEO’s compensation to nonfinancial outcomes, such as employee engagement scores and gender diversity in the workforce. Correlation is not causation, and we’ll continue to explore these results. But at first blush, they suggest a relationship between trust and the ability to drive change—a means of moving beyond short-term, “it’s the next leader’s problem” thinking….Yet the imperative to take decisive action has perhaps never been as strong. Business as usual isn’t mitigating the climate crisis or bridging the socioeconomic divide. The results of our 25th Annual Global CEO Survey lay these truths bare—and underscore the need for bold leadership to unite us as global citizens and problem solvers.
CEOs were, unsurprisingly, concerned about cyberattacks and public health. Relatedly, they were also concerned about macroeconomic volatility. Before the Russian invasion of Ukraine, only 32 percent listed geopolitical risk as a concern; presumably that number would be higher today. Despite rising interest in ESG, strategy — like incentive compensation — is still primarily driven by business metrics
Adding environmental, social and governance (ESG) metrics to executive pay packages can be a powerful way for a company to prove its commitment to these principles and to help elevate such metrics to the top of the CEO agenda. But as a recent PwC report makes clear, pay follows strategy—it doesn’t drive it. ESG metrics need to be part of a company’s strategic priorities, which are then reinforced by incentives. In setting up this system, boards should factor in both internal targets, which the company uses to benchmark itself, and external targets, which are based on measures of stakeholder impact, and establish individual KPIs and scorecards. They’ll also need to determine whether it’s most appropriate to tie the metrics to the CEO’s long-term incentive plan or annual bonus.