Global CEO

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foreword
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“No man is an island” wrote John Donne, the English poet and preacher, nearly 400
years ago. Our experience today as individuals, as business leaders, and as citizens of many nations bears
out the truth of his words. In conjunction with the World Economic Forum, PricewaterhouseCoopers
began research toward this survey report in the weeks following the September 11th attacks on the United
States. We concluded our research as a new government took office in Afghanistan and as a new year,
2002, arrived. In that interval, the 1,161 CEOs from 33 countries who participated in the survey have
confronted circumstances in the world, and often within their own companies, for which there is no
familiar response, no evident finish line beyond which all returns to normal. We are grateful that so many
CEOs stepped away from their immediate concerns to share with us their experiences and outlook.
We want and need to know many things from them. The most urgent issues relate to leadership in a
time of menace and outright war. What are their concerns, their expectations, their strategies and tactics?
However, that is not all. We knew that it would be important to weave together in this survey both the
longer-term concerns of CEOs and their response to crisis. Other issues of real weight include their views
on economic conditions, their approach to corporate social responsibility, the question of information
transparency, and the future of the Internet as a business channel — all matters that have been on the
minds of CEOs for some time.
At the end of our examination, what we found is that, even in these uncertain times, CEOs and their
companies have gone about the business of business. And within that context they have discovered
abundant opportunities — to improve their organisations, their communities, and our world.
We trust that this survey report provides fresh and useful insight. At this moment in time, this is how
we, as business leaders, are thinking, what we are doing.
Samuel A. DiPiazza, Jr.

Chief Executive Officer
PricewaterhouseCoopers
" CEOs worldwide responded to September 11th with action. In the short
term, nearly half created or revised corporate disaster recovery plans or
imposed travel restrictions, and 43 percent revised downward their financial
forecasts. Looking ahead, nearly 60 percent focus on two probabilities:
continuing stagnation in the global economy and the vulnerability of global
supply chains. PAG E 7
" More than a third of the CEOs foresee a stronger anti-globalisation move-
ment resulting from the terrorist attacks and their aftermath. PAG E 8
"The global economic downturn has precipitated strong action from CEOs,
highlights including workforce reductions and the outsourcing of non-core business

functions — both considered long-term solutions. On the other hand, 74
percent regard cutbacks in research and development as temporary. PAG E 1 1
" CEOs express deep concerns about the growing gap between rich and poor
countries, the digital divide, the environmental responsibilities of industry,
the social impact of corporate strategies and investments, and the crafting of
a more stable global economic system. PAG E 1 5
" Corporate social responsibility (“social reputation”) is an important agenda item

for today’s CEOs worldwide. North American CEOs are most confident of their
companies’ social reputations and Asia-Pacific CEOs least confident. PAG E 1 6
" Nearly 70 percent of CEOs say that corporate social responsibility is “vital”
to profitability. Even in the current economic climate, it will remain
a high priority for 60 percent of CEOs globally. PAG E 1 9
2 • PricewaterhouseCoopers
" One-third of CEOs now say the anti-globalisation movement poses a What’s Inside
genuine threat to doing business in years to come. Still, an overwhelming
number of CEOs view globalisation as a positive force for economic (87
4 Survey Participation and Methods
percent) and social (79 percent) change. PAG E 2 0
6 G-Impact: The Global Impact of September 11th
"A significant “value gap” exists between what CEOs and investors say is
important in assessing company value. For example, 83 percent of CEOs 10 G-Economy: The Global Economy
focus on workforce quality and retention, but only 51 percent of investors
14 CSR: Corporate Social Responsibility
emphasize this measure. PAG E 2 3
22 Value: The Value of the Enterprise
" More transparency is coming, but the results are hardly universal. Whereas
roughly 80 percent of Asia-Pacific CEOs expect to provide additional finan- 26 I-Promise: Is the Internet Fulfilling Its
Commercial Promise?
cial and non-financial information, only about one-third of Central and
South American CEOs envision increased transparency. PAG E 2 5 30 The CEO: The CEO in an Integrating World
" CEOs continue to have high expectations of the Internet, with nearly half 33 Featured Interview: Nitin Desai
seeing it as a part of doing business. But reviews are mixed on the impact of Under-Secretary-General
United Nations
Internet-based sales: 54 percent of CEOs cite in-line or above-expectation
sales but 46 percent cite below-expectation sales. Among the reasons, say 38 Featured Interview: Wilfred Kiboro
Group CEO
nearly 70 percent of CEOs: continued concerns about Internet security and The Nation Media Group
privacy. PAG E 2 8 and
Ayo Ajayi
"The dot.coms may have opened the business world to new technologies and Managing Director and CEO
UAC of Nigeria PLC
new thinking before their spectacular demise, but big, established companies
are aggressively filling the void, say more than 70 percent of CEOs. PAG E 2 9
PwC CEO Survey • 3

introduction
SURVEY PARTICIPATION AND METHODS
The search for knowledge continues. Confronted with

unprecedented challenges, leaders asked questions. They
shared perspectives. They analysed and questioned all the
data before them. This report is their important contribution
to our understanding of these unique times.
IN THE WORDS OF CEOS …
“WE MUST CREATE CERTAINTY OUT
OF UNCERTAINTY. ”
Australia
“THERE IS A CHINESE SAYING, ‘BAD

By a wide measure, this has been the most ambitious of five CEO surveys conducted in
recent years by PricewaterhouseCoopers in conjunction with the World Economic Forum. TIMES CAN ALSO BE OPPORTUNITIES
The total number of participating CEOs was 1,161: 316 from Europe 1, 220 from North
IF WE CAN MAKE THE BEST OF THEM.’”
America 2, 269 from Central and South America 3, and 356 from Asia-Pacific, including
Hong Kong
173 from Japan 4. Thirty-seven percent of the CEOs lead companies with more than 5,000
employees, and 28 percent are responsible for companies with 1,000 to 5,000 employees.
The survey was generally conducted by telephone, with the exceptions of Japan (postal
survey) and China (in-person interviews), beginning on October 1, 2001 and concluding in “DO NOT PANIC. DO NOTHING
early January 2002. The bulk of the U.S. interviewing took place in December and January,
TO ENCOURAGE EXASPERATION.
several months after the events of September 11th. The overall effort was co-ordinated by the
HAVE A LARGER VISION.”
PricewaterhouseCoopers International Survey Unit, based in Belfast, Northern Ireland, with
the assistance of other agencies in several countries. France
“KEEP THE DIRECTION IN THE STORM.”
Chile
1 Czech Republic, France, Germany, Italy, Netherlands, Norway, Poland, Sweden, Switzerland, Turkey, U.K.
2 Canada, Mexico, U.S.
3 Argentina, Brazil, Chile, Colombia, El Salvador, Peru, Uruguay, Venezuela
4 Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand PwC CEO Survey • 5
g-impact
THE GLOBAL IMPACT OF SEPTEMBER 11TH
It is safe to say that no CEO stood by, inactive, after the terror
attacks of September 11th and the waves of fearful realisations
that followed soon after. The attacks were on the United States,
but much of the world felt vulnerable. Leaders and whole peoples
responded. Business responded.
For all of the findings in this report, the survey data can be viewed from three perspectives: EXHIBIT 1 POST-SEPTEMBER 11TH ACTIONS
What actions were taken following the terrorist
the global data as a whole, by region, and by broad industry grouping (financial services; attacks of September 11th?
technology, information, communications, and entertainment; and consumer and industrial

Increased expenditures
on company and 33%
products and services). Exhibit 1 shows how the world’s CEOs responded to a question employee security
Created or updated
about actions they have taken since the terrorist attacks on the United States. [EXHIBIT 1] your company's 48
disaster recovery plans
The distribution is striking: nearly half either created or revised corporate disaster recovery Revised financial
forecasts downward 43
plans, nearly half imposed travel restrictions, and again nearly half revised downward their
Cut staff 19
financial forecasts. In the global data, staff reductions appear to have been considerably less
important as a tactic, but the regional data show that 33 percent of North American CEOs Cut spending 42
laid off workers and 56 percent cut spending. In most of the other categories, the North Imposed travel 48
restrictions
American response was more acute. In Asia-Pacific, for example, only 12 percent of the
Other 6
CEOs reduced staff and 39 percent cut spending.
0% 20% 40% 60% 80% 100%
The key insight offered by the data is that no part of the world acted as if it were remote
from danger. Even in Central and South America, which rarely surfaces in the news as a
target for international terrorism, 35 percent of CEOs increased expenditures on company
and employee security, and 48 percent either took their disaster recovery plans out of the
drawer for critical review or took steps to create such a plan. In Europe, 41 percent
of the CEOs’ companies revised financial forecasts downward, 32 percent cut spending,
and nearly a third increased spending on security. The assertion of U.S. President Bush that
the entire world is at risk finds its confirmation in these data: CEOs worldwide responded
as if they know this to be so.

EXHIBIT 2 SEPTEMBER 11TH: LONG-TERM IMPACTS Longer-Term Impacts

Which of the following long-term impacts of
the events of September 11th do you anticipate?
The first survey question addressed CEOs’ short-term responses to crisis. But what of the
Continuing stagnation longer-term impacts? Exhibit 2 depicts CEOs’ views on the extended business consequences
in the global economy 57%
Reduced emphasis
of the terrorist attacks. [EXHIBIT 2] Nearly 60 percent focused on two probabilities: continuing
on e-commerce due 14
to fears of cybercrime
stagnation in the global economy and the vulnerability of global supply chains. The issue of
Reconsideration of
vulnerabilities of
global supply chains
59 stagnation was strongest in the minds of Asia-Pacific CEOs (78 percent), not unreasonable
Weakening of
American/European
17
in light of Japan’s unresolved, long-term economic difficulties. The question of supply chain
brands in the
global marketplace
vulnerability was uppermost in the minds of Central and South American and North
Growing opposition
to globalisation 36
American CEOs (69 percent and 64 percent, respectively), who have been the most direct
Reduced emphasis on
overseas investment
and expansion
48
witnesses to the social and economic disruptions caused by what we now know to call
Other 4 “asymmetric acts of war.”
0% 20% 40% 60% 80% 100% The likelihood of stronger opposition to globalisation may interact with the fact that
nearly half of the CEOs expect reductions in overseas investment and expansion as a result
of the terror attacks and in light of the implications for the peaceful conduct of global
business. More than a third of the CEOs, equally across regions and industries, take the view
that the anti-globalisation movement will gain influence in the aftermath of September 11th.
But how do these two findings relate to each other? CEOs will be understandably more
cautious about overseas activities in a time of war and high uncertainty. However, they
must be anticipating, to some degree, that the anti-globalisation movement will strengthen;
there is no persuasive evidence at present that this is so.
On the contrary, the conscience of the world and of many governments has awakened,
and the issue of corporate social responsibility has never been more acutely drawn (see
pp. 14-21 for survey data on this topic). In this new atmosphere, the anti-globalisation agenda
may well move toward the centre, where it can substantively influence corporate ethics
without asserting that business must somehow undo the remarkably productive global “WE HAVE TO ACCEPT THE IDEA
pattern now emerging. If more than a third of the CEOs foresee a stronger anti-globalisation
THAT NOW WE ARE OPERATING
movement, it may mean they are anxious in this regard and perceive the need to resolve
IN A MARKET WITH MORE
this issue soon — before further violent street protests spoil the opportunity to think together
and redefine corporate social responsibility in ways that serve all stakeholders. ELEMENTS OF RISK.”
To put it simply, for many CEOs, the end of innocence came abruptly and painfully and
Italy
left them in uncharted territory. Still, in the post-September 11th world, the message from
global CEOs is clear and unmistakable: stay the course. As one CEO told us, “It is important
that we understand the changing environment and distinguish between what we are afraid
of and what we shouldn’t be afraid of.”
“WE HAVE TO ENCOURAGE
PEOPLE TO LOOK BEYOND THE
SHORT TERM AND TO STRIVE TO
BUILD AN ORGANISATION WHICH
WILL GROW AND PROSPER FOR
THE BENEFIT OF ALL OF THE
RELEVANT STAKEHOLDERS OVER
THE LONGER TERM.”
Australia

g-economy
THE GLOBAL ECONOMY
Before the events of September 11th, many CEOs were already

cutting back in response to a weakened U.S. economy and its
ripple effect around the world. Caution had become the watch-
word — caution and a keen eye to economic and capital markets
indicators. While waiting for statisticians to formally declare a
recession, most CEOs already knew it had arrived.
10 • P r i c e w a t e r h o u s e C o o p e r s
Global economic conditions are in part the sum of local conditions and in part a new EXHIBIT 3 GLOBAL ECONOMY
Which methods have been used to address the
phenomenon of interdependence driven by global capital markets, global brands, and challenges of current global economic conditions?
global supply chains. The methods CEOs have enlisted to address the challenges of today’s
Plant/office closures 24%
economic conditions show surprising consistency across regions and industries. Workforce
Cut back in research 18
and development
reductions and the outsourcing of non-core business functions, respectively at 50 percent
Workforce reductions 50
or lay-offs
and 46 percent of the CEOs, offered the tools of choice to respond to the global economic
Outsourcing of non- 46
core business functions
downturn. Among European CEOs, 53 percent referenced workforce reductions. Among
Pay cuts 17
Central and South American CEOs, still more relied on this approach (58 percent). [EXHIBIT 3] Abandoned or
curtailed international 24
expansion plans
Cost-controlling CEOs in Asia-Pacific were more willing than others to impose pay cuts Scaled back Internet-
related expenditure 16
in order to see their companies through the rough patch — 23 percent did so, whereas only Sought additional
capital through stock 16
offering or borrowing
15 percent in North America took this approach. Given the predominance of Japanese
Others 16
CEOs in the Asia-Pacific sample, this finding must reflect something of the acute Japanese 0% 20% 40% 60% 80% 100%
sense of community and willingness to share burdens, shaken but not dissolved by more TEMPORARY FIX OR LONG-TERM RESPONSE?
than a decade of economic distress. Plant/office closures 27%

73
From an industry perspective, the technology industry cluster tended to do more of every- Cut back in research 74
and development 26
thing — more plant and office closures, more lay-offs, more caution about international Workforce reductions 41
or lay-offs 59
expansion plans. This is not really surprising, because the technology industry had sat on Outsourcing of non-
core business functions
19
81
top of legendary amounts of excess capacity in relation to demand. Thirty percent of CEOs Pay cuts 80
20
Abandoned or
in this industry have curtailed or abandoned such plans. curtailed international
27
73
expansion plans
There are important follow-up questions: are these adjustments strategic or tactical? Scaled back Internet-
related expenditure 32
68
Sought additional
Are they structural changes or short-term fixes? In response, the CEOs fanned out across capital through stock
offering or borrowing
39
61
37
a wide spectrum of options. For example, 73 percent regard plant and office closures as Others
63
0% 20% 40% 60% 80% 100%

permanent, and 74 percent view cutbacks in research and development as temporary.
Temporary fix Long-term adjustment
Perhaps a warning signal: 44 percent of European CEOs — significantly more than in other
P w C C E O S u r v e y • 11
regions — view cutbacks in R&D as permanent. Among North American CEOs, only 22
percent see those cutbacks as permanent. If proprietary R&D is the seedbed of a company’s
future, then the European attitude bears another look and perhaps reconsideration
by corporate leadership.
Another significant trend: more than ever, CEOs are adopting outsourcing as a key
“I WOULD ADVISE COMPANIES TO corporate strategy. Seventy-six percent of North American CEOs regard their recent
outsourcing decisions as permanent, as do 82 percent of Europeans, 92 percent of Asia-
CONSOLIDATE — SPEND LESS, REDUCE
Pacific CEOs, and 74 percent of Central and South American CEOs. It is not only the
HEADCOUNT. AS THINGS IMPROVE,
economic downturn that propels this strategic change. A trend for some years now, the rise
YOU CAN REINSTATE THINGS THAT of outsourcing reflects a new view of the core company as a branded marketing and R&D
organisation, relying on external alliance partners for manufacture and services.
HAVE BEEN ELIMINATED.”
A footnote to all of this strategic and tactical manoeuvring: whereas Asia-Pacific CEOs
United States
were more willing than any to impose pay cuts, fully 87 percent regard that sacrifice as a
short-term measure that will be reversed once conditions improve.
In some ways, recent events have made the world feel, alternately, like both a bigger and
a smaller place than before. CEOs found themselves connected — perhaps emotionally —
“MAKE SURE YOUR ORGANISATION
as never before, yet less willing to undertake global ventures. Some turned inward: nearly
HAS CONFIDENCE, REASSESSING one-quarter abandoned or curtailed international expansion plans. The good news is, only
AND MOVING WITH THE TIMES.” 27 percent regard this as a permanent decision. When times get better, the great majority
expect to resume international projects.
United Kingdom
What factors influence CEO decisions to invest in one country rather than another?
PricewaterhouseCoopers holds that five variables are among the most important in this
regard: the relative level of corruption in a country, the robustness of its legal system, the
prudence of economic policy at the government level, the clarity and enforcement of
accounting and reporting rules, and the nature of the regulatory regimen. Greater opacity in
any of these respects is likely to deter foreign investment and create hidden costs of doing
business, while greater transparency invites investment.
Questioned about the relative importance of these variables, the CEOs make clear
distinctions: the existence of corruption, the quality of the judicial and legal system, and
the stability of economic policies all matter to more than half of the CEOs. [EXHIBIT 4] They EXHIBIT 4 INTERNATIONAL INVESTMENTS
Which issues affect the decision
are considerably less concerned with accounting standards and regulatory matters, although to invest in other countries?
NOT
one-quarter to one-third of the participating CEOs also look carefully at these factors. The UNSURE RELEVANT
The existence
of corrupt business -20% 51 14 12
findings by region and industry are consistent with the global results reflected in Exhibit 4. practices
How best to summarise the CEOs’ approach to the current global economy, which was Lack of an
effective legal and -15 54 18 10
judicial system
already troubled before the stresses and uncertainties imposed by terrorism? In the short
Unstable -9 53 26 10
term, CEOs are working every lever available to them to steady their companies and stay on economic policies
course. In the longer term, they expect to retain some of the short-term adjustments they Lack of effective
-27 26
accounting standards 31 14
have made but to resume — no doubt, more cautiously — the expansive, global initiatives
Lack of strong
-20 32 34 12
that have become the hallmark of business life in our time. regulatory frameworks
-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%
Little or no impact Considerable impact
csr
CORPORATE SOCIAL RESPONSIBILITY
The events of September 11th cast a long shadow. Every CEO

and every company were affected in ways — large and small —
heretofore experienced in some regions but never on a global
scale. Every CEO and every company were now clearly citizens
of the world. But how do CEOs understand that role?
When it comes to corporate social responsibility, one size definitely does not fit all. While
corporate social responsibility has become a near universal value, it manifests itself quite
differently from region to region, country to country. In Africa (see the interviews with Wilfred
Kiboro and Ayo Ajayi on p. 38), for example, corporate social responsibility is perceived as a
strong connection between corporate profitability and societal improvements, including
infrastructure, education, and addressing the ravages of AIDS. Elsewhere, corporate social “DEFEND GLOBALISATION AS A SOURCE
responsibility may be shorthand for, say, environmental responsibility, ethical economics, or
OF GROWTH IN THE WORLD.”
charitable giving. Few would deny that corporate social responsibility is about “doing the
Chile
right thing.” But who defines and determines what is right and what is not?
The worldwide debate about corporate social responsibility has acquired urgency in recent
years within the business community — in international financial institutions (IFIs) such as the
International Monetary Fund and the World Bank and in non-governmental organisations
(NGOs) such as the World Economic Forum. The growing gap between rich and poor coun- “THE PROBLEM WITH GLOBALISATION
tries, the digital divide, the environmental responsibilities of industry, the social impact of
IS THAT THE POOR PEOPLE GET
corporate strategies and investments, and the crafting of a more stable global economic system
POORER. WE NEED TO THINK ABOUT
are all matters of urgent concern for leaders of business and major multilateral organisations.
CEOs must dictate and proactively manage the corporate social responsibility agenda in a THAT AND DO SOMETHING.”
world that increasingly asks this of them.
Germany
The question of corporate social responsibility has also moved toward the top of the
agenda for an informal confederation of NGOs, which marshal both alternative policy
proposals and a capacity to field street demonstrations and protests. In several instances,
demonstrations timed to coincide with high-level meetings have resulted in civic disorder,
extensive property damage, injury, and death. The intellectual agenda of the so-called
anti-globalisation movement (some within the movement now prefer the term “alternative
globalisation”) is not focused entirely on the conduct of corporations. There is intense
EXHIBIT 5 CORPORATE SOCIAL RESPONSIBILITY concern, for example, with the nature and impact of IFI lending policies and with the
To what extent is your company perceived
as having a positive social reputation? regulation of global financial markets. But the issue of corporate social responsibility is
nonetheless a key concern. NGO demands that companies and their leadership do the right
To a great
extent
47% thing will certainly increase in volume in the near term. CEOs bear a responsibility to
their organisations — and all the varied stakeholders — to carefully audit their practices
To some 41
extent
and proactively address and resolve potentially troublesome issues.
Not really 4
On the global basis visible in Exhibit 5, many CEOs seem to view their companies’ social
reputations as a work in progress. [EXHIBIT 5] While 47 percent are resolutely proud of
Not at all 1
their companies in this regard, another 41 percent offer a qualified view —“to some extent.”
Unsure 7 By region, North American CEOs are more confident of their companies’ reputations
0% 20% 40% 60% 80% 100% (64 percent “to a great extent,” 30 percent “to some extent”), while Asia-Pacific CEOs
are least confident (28 percent “to a great extent,” 54 percent “to some extent”). By industry,
EXHIBIT 6 DEFINING SOCIAL REPUTATION
What factors influence your company’s the split is consistently equal — in financial services, for example, 46 percent of CEOs are
social reputation?
satisfied, while 43 percent claim only “to some extent.”
Good environmental But what do the CEOs really mean by corporate social responsibility/social reputation?
71%
performance
What are its actual components? Exhibit 6 reflects and weights what must be the main
Charitable contributions 54
components, amongst which an internal concern (a healthy and safe working environment)
Support for
community projects
71 and a broad external concern (acting responsibly toward all stakeholders) are clearly the
Creating value for the 74
most important. [EXHIBIT 6] The second tier of concerns includes shareholder value, environ-
company's shareholders
mental performance, and support for community projects, while the last tier includes
Provision of a healthy and 86
safe working environment
charitable contributions and external endorsements or stamps of approval.
Acting responsibly towards
all company stakeholders,
regardless of whether 84 The regional and industry views of the same data are revealing. North American CEOs are
this is legally required
External endorsement/ 51
at the high end of the scale in every category — for example, 93 percent regard responsible
stamp of approval
0% 20% 40% 60% 80% 100% actions toward all stakeholders as a key influence on their companies’ social reputation, and
91 percent cite the importance of supporting community projects. External endorsements
matter to 61 percent of North American CEOs — unsurprising in an environment where

public opinion has focused on corporate social responsibility as a fresh and urgent issue.
For North America, the somewhat secondary importance attributed to creating shareholder
value — at 76 percent — cannot help but call attention to itself. The CEOs recognise that
corporate social reputation has less to do with earnings and more to do with reputation
across a broad array of stakeholders. EXHIBIT 7 KEY STAKEHOLDERS
What stakeholders influence corporate
In Europe, the foremost issue is provision of a sound working environment (93 percent), social responsibility strategy?
followed at a slight distance by responsibility to all stakeholders (82 percent) and ensuring
Board members 22%
shareholder value (67 percent). By a small margin, European CEOs prove to be most
Shareholders 20
sensitive to external endorsements (62 percent). For Asia-Pacific CEOs, external endorsements
Customers 26
or clients
are relatively unimportant (35 percent), reflecting societies in which public opinion is unlikely
Suppliers 1
to be as consistently focused around issues of corporate reputation as elsewhere in the world.
Employees 13
Central and South American CEOs agree on first things first: a safe and healthy working Management 11
environment is their dominant concern (90 percent), followed by responsibility to all stake- Non-Governmental
Organisations 1
(NGOs)
holders (86 percent). Central and South America is the centre of a burgeoning movement to
Government 4
promote corporate social responsibility. Chiquita Brands, a banana producer with extensive
Refused 2
operations in Central and South America, issues a global corporate social responsibility 0% 20% 40% 60% 80% 100%
report (www.chiquita.com/corpres/decide.asp) that is considered the global gold standard.

The term “stakeholders” has appeared prominently in this exploration of corporate social
responsibility. Who are they? Which stakeholders dominantly influence strategy in the area
of corporate social responsibility? Exhibit 7, where the CEOs’ responses to this question
will be found, indicates the percentage of CEOs identifying one or another stakeholder as
the most influential in this regard. [EXHIBIT 7] Board members and customers, followed after
a slight gap by shareholders, prove to be most influential. Where one might expect greater
influence — for example, NGOs at 1 percent, fellow executives at 11 percent — there are
relatively few CEOs who listen first to these sources. It is worth remembering that boards
around the world differ considerably in their composition, a difference reflected in the
regional data. In Asia-Pacific, where boards tend to be large and to have an influential core
membership, 33 percent of CEOs from that region identify the board as the primary influ-
ence on corporate social responsibility. In Europe, where boards typically include varied
EXHIBIT 8 IMPORTANCE OF CORPORATE stakeholders, 22 percent of CEOs listen first to their boards. In North America, where the
SOCIAL RESPONSIBILITY
To what extent do you agree or disagree with the character of boards varies from influential activist to inactive bystander, only 12 percent of
following statements?
the region’s CEOs listen first to the board. Across all regions, including Central and South
UNSURE
America, shareholders and customers come first — a particularly significant finding in

Corporate social
responsibility is largely
a public relations issue
-26% -25 20 8 21 Central and South America, incidentally, since boards in this region have traditionally been
-20 paramount, owing to the fact that many of the companies are family-owned, managed, or
Corporate social
responsibility is vital
dominated. Remember, too, that while boards may differ in size, composition and influence,
-5 -9 38 30 19
to the profitability
of any company
they all have legal responsibilities to uphold.
In the current The issue of corporate social responsibility involves attitudes as much as or more than
economic climate,
corporate social 15
responsibility
-29 -31 18 7
metrics. It has to do, in part, with intangibles that ultimately shape policies that influence
activites will assume
a lower priority
the quality of life. A survey question explored attitudes by asking CEOs to grade their level
-80% -60% -40% -20% 0% 20% 40% 60% 80%
of agreement or disagreement with fairly provocative statements. You will find the questions
Strongly disagree Somewhat disagree Somewhat agree Strongly agree and their responses in Exhibits 8 and 9.
Is corporate social responsibility largely a public relations issue? [EXHIBIT 8] The subtext
of this provocative question is that well-managed “spin” is all that is required, with only
enough substance to justify putting a good face on matters. Fifty-one percent of the CEOs
disagreed vigorously or to some degree with this position. On the other side of the issue,
28 percent found some merit in this view of things (and another 21 percent, quite unusually,
simply didn’t know). By region, 24 percent of Central and South American CEOs and
35 percent of European CEOs agreed or tended to agree that public relations has a great
deal to do with it. In reviewing these findings, attention may be drawn to the unexpectedly “WE BELIEVE THAT CORPORATE
large group of CEOs who could neither agree nor disagree with this proposition. Would this
SOCIAL RESPONSIBILITY AFFECTS
indicate that their view of corporate social responsibility is still taking shape?
CORPORATE PROFITS. THE
A further question sheds light on the relative importance of corporate social responsibility.
Is the proper exercise of corporate social responsibility vital to the profitability of any CORPORATION NEEDS TO BUILD
company? In response to this question, the CEOs grouped into a large majority: 68 percent
A GOOD REPUTATION.”
strongly or somewhat agree that it is vital to profitability. However, there is again a large
Thailand
contingent, 19 percent, who simply don’t know. Across regions and industries, the data show
the same tendency toward a strong majority recognising the link with profitability. Perhaps
it is best to read this finding against the prior one: whether corporate social responsibility
is a matter of substance or more a matter of public relations positioning, the company’s
reputation in this regard does affect profitability. “THE BIGGEST ISSUE TODAY IS TO
The third and final question reflected in Exhibit 8 asks whether, in the current difficult
ESTABLISH GROWTH — LONG-TERM
economy, corporate social responsibility can be viewed as a lower priority. Sixty percent
GROWTH FOR INVESTORS AND
of CEOs reply that this isn’t so. They expect it to retain its importance. The industry view
shows 30 percent of CEOs in the technology industry cluster say that it will not have the SHAREHOLDERS … AND, AT THE
same priority. The importance given by the CEOs to the construction of the social reputation
SAME TIME, TO ACHIEVE A BALANCE
of their companies has much to do with the rising importance of their companies’ brands —
FOR SOCIAL ISSUES.”
today an important (and intangible) component of companies’ value. We would expect this
connection between social reputation and brand to continue. Switzerland
Based on numerous factors, the globalising strategy of larger businesses has been stripped
in the past half-decade of its political and social innocence. What once seemed to many
CEOs an obvious verity — that globalisation creates opportunity in developing countries
and is, on the whole, beneficial — has been subject to strident protests, reasoned critique,
and waves of investigative journalism. In this new time of controversy, when ideas and
EXHIBIT 9 THE FUTURE OF GLOBALISATION strategies are being challenged and must be effectively defended, how are CEOs seeing the
To what extent do you agree or disagree with the
following statements? situation? Exhibit 9 reflects their views on some of the most important elements of this new
In light of the
terrain. [EXHIBIT 9]
violence at the recent
Genoa meeting, the
G8 governments -55% -20 5 5 Moving from theory to practice in the area of globalisation, CEOs were asked whether
should abandon their
annual summit
the G8 governments should abandon their annual summit so as to avoid the possibility of
The anti-globalisation
protest movement
is a genuine threat -24 -20 22 11 street violence. Seventy-five percent of CEOs do not counsel this — the meetings must not
to doing business in
the 21st century
retreat in the face of threats to their peaceful conduct. However, 16 percent of the European
Globalisation will
be a positive force -3 -6 36 43 CEOs agree somewhat or fully that G8 meetings should be abandoned, perhaps because the
for social change
violence at Genoa occurred in their own neighbourhood and had more impact, through
Globalisation will
be a positive force -2 -2 35 52 media reports and other means, than elsewhere.
for economic change
Is the anti-globalisation movement a genuine threat to doing business in years to come?
The globalisation trend
will exclude developing
countries and lead
to an increased gap -21 -26 21 12 Forty-five percent of the CEOs do not think so — but 33 percent do think so. Asia-Pacific
between “have” and
“have-not” nations CEOs are more edgy over this issue than others: 44 percent agree somewhat or fully that
-100% -50% 0% 50% 100%
trouble lies ahead. Clearly, CEOs as a whole are believers in the social and economic
Strongly disagree Somewhat disagree Somewhat agree Strongly agree benefits of globalisation, not only in their own narrow patches of the world but for all
participants who contribute to globalised enterprise. Just under 80 percent agree that
globalisation will be a positive force for social change, and 87 percent say that it will be
a positive force for economic change.
This series of questions concluded with another provocation. The survey asserted, for
argument’s sake, that globalisation will exclude developing countries and increase the gap
between rich and poor nations. Looking at the issue in this light, CEOs as a whole were
more evenly divided: 48 percent say globalisation will have these negative effects, but 32
percent agree somewhat or fully that this will occur. North American CEOs and those in the
technology industry cluster are most optimistic about the inclusiveness of globalisation and
its capacity to lift countries struggling with widespread poverty. Central and South American
CEOs are more divided about the potential of globalisation to achieve these benefits (45 “A BIG ISSUE TODAY IS THE
percent look to a good future, 41 percent worry that some nations will be excluded and
REDISTRIBUTION OF INCOME/
fall still further behind). What occurs in one’s own backyard clearly matters: just as
WEALTH BETWEEN COUNTRIES.
the Europeans who witnessed from nearby the violence at Genoa have more doubts about
the good sense of continuing G8 summits, the Central and South Americans who are THE PROTECTIONIST POLITICS
struggling with widespread urban poverty and, in some areas, the transformation of marginal
OF THE RICH COUNTRIES
agricultural economies have more doubts about wealth distribution through globalisation.
ARE FOSTERING A NEGATIVE
Inter-regional relationships are similarly important — and they present key challenges and
opportunities for CEOs. For instance, Central and South American countries are sensing a OPINION OF GLOBALISATION IN
new scenario in their relationship with the United States, as America shifts its attention to
THE ‘HAVE-NOT’ COUNTRIES.”
the Middle East, Central Asia and elsewhere. In the short term, the implications for Central
Argentina
and South American companies are significant: additional trade restrictions, the disappear-
ance of subsidies, and the emergence of a new, more globalised world environment.
The three questions on the impact of globalisation seem to frame a continuum of possi-
bilities from what could and should occur to what may, in reality, occur. Like every business
strategy, globalisation creates risks as well as opportunities. And today some of those risks “I THINK MOST BUSINESS LEADERS
lie outside the realm of strictly business risks in the domain of “civil society,” in which what
SHOULD RETHINK THEIR STRATEGY
businesses do is measured not by financial statements but by the effects on social welfare
AND CONCENTRATE ON THE LOCAL
and cultural identity. The issue of corporate social responsibility became new again, and
urgent, in the late 20th century. It is certain to remain a key point of reference in business MARKET AT THIS MOMENT.”
thinking and strategy in the first decades of the new century. It is up to progressive CEOs
Indonesia
to use their influence to effect socially and fiscally responsible change.
value
THE VALUE OF THE ENTERPRISE
The rise of the Internet, the sheer power of new information

technologies to crunch data, the growth of global capital markets
in which investors large and small are avid participants — all of
those, and more, have focused attention on the value of enterprises
and the types of information that companies issue to report and
promote their value.
CEOs are the ultimate insiders where their companies are concerned: in principle, there is EXHIBIT 10 THE VALUE GAP
Which of the following do you take into account/
no number, no operating issue, no problem or opportunity hidden from them across their do investors take into account when assessing
company value?
companies. They assess the value of their companies and chart their courses toward future
CEOS
value by means of vast information and key relationships. This raises a few critical ques-
Earnings 94 %
tions: Can outsiders reach a comparably well-founded valuation of a company and its
Innovation and R&D 74
prospects? Does the information disclosed by a company offer a sufficiently comprehensive Brands and reputation 82
and transparent view to permit knowledgeable investment decisions? These questions are Customer/client base 84
Customer/client
hotter than they sound. The framework for corporate reporting in many countries is under retention & profitability 85
Workforce quality
pressure: regulators want more information and more types of information, and investors are and retention 83
Cash flow 87
doing whatever it takes to fill in information gaps. Recent and large-scale business failures,
Market conditions 74
though few in number, have dramatised the need for greater transparency. Further, the
Sector performance 69
market valuation of companies, in both good and bad times, is a direct determinant of their
Corporate strategy 85
ability to access capital at reasonable cost and to “wheel and deal” freely when opportuni- 0% 20% 40% 60% 80% 100%
ties arise. And market valuation depends ultimately on information.

INVESTORS
In Exhibits 10 through 12, you will find the CEOs’ views on key information and valua- Earnings 90%
tion issues. Exhibit 10 explores the differences between CEOs’ key indicators as they assess Innovation and R&D 57
the value of their own companies and the key indicators they say they believe investors use. Brands and reputation 73
[EXHIBIT 10] Clearly, everyone agrees on the importance of certain measures: earnings, cash Customer/client base 60
Customer/client
66
flow. But after duly noting these points, the CEOs seem to feel that investors aren’t paying retention & profitability
Workforce quality 51
and retention
enough attention. The CEOs say they believe that nearly every measure is less used by
Cash flow 81
investors. There is what we might call a “value gap.” For example, 74 percent of CEOs look
Market conditions 71
at the level and quality of innovation and R&D, but only 57 percent say investors pay Sector performance 69
attention to this measure. Similarly, 85 percent of the CEOs examine client acquisition and Corporate strategy 78
retention, but only 66 percent say investors do the same. 0% 20% 40% 60% 80% 100%
EXHIBIT 11 VALUE JUDGMENTS What lurks in this finding is the question, cited earlier, about the comprehensiveness and
To what extent do each of the following
understand the value of your company? transparency of information offered to investors. Some indicators most prized by CEOs are
NOT either intangible or have an intangible component. Consider, for example, workforce quality
UNSURE RELEVANT REFUSED
Institutional investors - 4% -10 32 32 15 6 1

and retention: 83 percent of CEOs consider it in their evaluation of their companies, while
they say they believe only 51 percent of investors consider it. This dimension of an enter-
Retail investors -10 -23 25 10 24 7 1
prise is in part measurable (employee retention, higher educational degrees attained, etc.)
Employees -2 -7 44 31 15 2 0
and in part a matter of judicious opinion. Similarly, in the area of R&D and innovation, one
Suppliers - 5 -10 37 21 20 6 1 can count patents and advanced degrees, but one can’t count in quite the same way the
Rating agencies - 4 -10 32 25 20 7 2 brilliance of a particular team that may be “onto something.” Exhibit 10 reflects CEOs’ dis-
content with investors’ views, but it also points up the fact that CEOs could require their
Analysts -3 -7 39 30 15 5 1
-40% -20% 0% 20% 40% 60% 80%

companies’ reporting units to be more forthcoming with non-financial information.
Exhibit 11 gives a strong CEO vote of confidence to three constituencies: institutional
Not at all Not really To some extent To a great extent
investors, analysts, and the company’s own employees. [EXHIBIT 11] Sixty-four percent of
CEOs say institutional investors are well-informed about their companies; 69 percent say
EXHIBIT 12 INCREASING TRANSPARENCY that analysts’ views are fully accurate or tend to be so; and 75 percent say employees know
Do you expect your company to become more
transparent in the financial and non-financial the value of the company. From there, the vote of confidence drops off: for example, only 35
information it discloses?
percent of CEOs are fully or reasonably confident that retail investors value the company
TECHNOLOGY, CONSUMER
INFORMATION, & INDUSTRIAL
FINANCIAL SERVICES
COMMUNICATIONS
& ENTERTAINMENT
PRODUCTS
& SERVICES
accurately. Where rating agencies are concerned — and they are key players in the valuation
process — the CEOs also have doubts. Only 25 percent are fully confident of the judgment
Financial
information 57% 51% 59%
of rating agencies; another 32 percent are somewhat confident. In the data for North
Non-financial
America, retail investors meet with little favour: only 20 percent of CEOs in that region
information 54 49 59
regard retail investors as making valuations that are fully or somewhat accurate.
CEOs that feel greater
transparency will help
investors understand 91 91 93
company value
0% 50% 100% 0% 50% 100% 0% 50% 100%
Responding to the final question in the series on information and value, CEOs looked “THE CORPORATE ENVIRONMENT IS
at whether they expect to become more transparent in the financial and non-financial
CHANGING QUITE QUICKLY, AND
information their companies disclose. Exhibit 12, conveying the findings by industry, shows
GLOBAL COMPETITION WILL BE
that in every instance, majorities responded that they do expect to make more transparent
disclosures in financial information. [EXHIBIT 12] Beyond this, more than 90 percent of CEOs INFINITE. A COMPANY HAS TO
across industries are convinced that this will help investors to better understand the value
MANAGE TO BALANCE THE DIFFERENT
of their companies.
DEMANDS FROM INTERNAL AND
The view by regions is strikingly more mixed: while 81 percent of Asia-Pacific CEOs
expect to offer more transparent financial information (and 80 percent expect to offer more EXTERNAL STAKEHOLDERS.
transparent non-financial information), the same level of enthusiasm is missing in Central
THEREFORE, IN ORDER TO GROW
and South America, where the findings are only 32 percent and 33 percent, respectively.
CONSTANTLY, A COMPANY HAS TO
Consistently, however, a strong majority of CEOs in all regions say that more transparency
leads to better investor understanding of the company’s value: they expect their efforts in CONCENTRATE ON AND SUPPORT
this regard to generate a handsome return.
ITS CORE BUSINESSES.”
In the end, there is no substitute for information. CEOs, managers, analysts, and
South Korea
investors — everyone requires sophisticated financial and non-financial information to
assess company value. In the case of retail investors, whom CEOs say lack sufficient
information, there is a clear challenge: to provide investors with all the information they
need — and in a form they can easily digest. The good news is that CEOs are increasingly
taking the lead in the growing movement to provide information on intangible assets and
non-financial drivers that are so critical to a deep understanding of a company’s current
condition and future financial success. It is time to close the value gap.
i-promise
IS THE INTERNET FULFILLING ITS
COMMERCIAL PROMISE?
Several years ago, PricewaterhouseCoopers advocated the view
that “e-business is business.” In other words, the Internet would
be so quickly integrated into supply chain management, internal
and external communications, R&D, marketing, sales, and much
else that it would no longer make sense to separate out the “e”
in “e-business.” This view was nearly correct.
As much as we might like to fully immerse ourselves in the Internet Age, we have not. The EXHIBIT 13 INTERNET USE (all CEOs)
Which of the following best describes
survey findings here are unmistakable and powerful: the Internet as a business tool receives your company’s use of the Internet?
mixed reviews from the CEOs. For every CEO who thinks highly of the current contributions
The primary
of the Internet to business success, another is disappointed or defines e-commerce as a work sales channel 4%
in progress, incomplete at this time. Yet the Internet is indisputably the master invention of
Part of a multi-
channel strategy
40
our time, and business — like society itself — has everything to gain from it. for reaching
customers
Exhibit 13 shows that a strong contingent of CEOs views the Internet as one tool among
Part of tool kit
for doing 47
many for doing business (47 percent) and as part of a multi-channel strategy for reaching business
customers (40 percent). [EXHIBIT 13] It is the primary sales channel for only 4 percent of the
Not important
to business 9
CEOs (however, 7 percent in the technology industry cluster), and 9 percent of the CEOs
0% 20% 40% 60% 80% 100%
regard it as unimportant. The same data by region, in Exhibit 14, indicate that very few Asia-
Pacific CEOs consider the Internet unimportant for their businesses (2 percent on a base of
356 respondents), and a majority of these CEOs (58 percent) regard it as part of the tool kit. EXHIBIT 14 INTERNET USE (by region)
Which of the following best describes
[EXHIBIT 14] Among Central and South American CEOs, although 42 percent have the Internet your company’s use of the Internet?
in their tool box, another 20 percent consider it unimportant for business — a finding due, NORTH AMERICA EUROPE ASIA-PACIFIC SOUTH AMERICA
perhaps, to the generally low levels of connectivity available in that region. The primary
4% 6% 4%
sales channel 3%
It is the regional chart that sheds light. Although the level of Internet commerce is still
Part of a multi-
greater in North America than elsewhere5, CEOs worldwide and across industries have just channel strategy
for reaching 51 40 36 35
customers
about the same views of the uses and importance of the Internet for business purposes. In
Part of tool kit
some parts of the world, CEOs are out ahead of the available infrastructure and Internet user for doing 38 44 58 42
business
base. This suggests that CEOs and their businesses will be driving forces for the continued
Not important
growth of Internet use worldwide. to business 7 9 2 20
0% 30 60 0% 30 60 0% 30 60 0% 30 60
5 According to IDC’s Internet Commerce Market Model, at year-end 2001 there were nearly 500 million Internet users worldwide, with Western Europe
(148 million or 29.8 percent) overtaking the U.S. (145 million or 29.2 percent). The U.S. maintains a commanding lead, though, in Internet commerce,
with 43.7 percent of the $615.3 billion, compared with 25.7 percent for Western Europe, which overtakes Japan (15.8 percent) for the second position. P w C C E O S u r v e y • 27
EXHIBIT 15 INTERNET-BASED SALES Exhibit 15, inquiring about the robustness of Internet-based sales, is based on slightly less
Are Internet-based sales tracking in line
with, above, or below expectations? than half the full survey sample; the other half has no Internet-based sales at this time.
[EXHIBIT 15] This limited sample reinforces the message of Exhibit 14, to the effect that CEOs
Tracking in their thinking tend to be out ahead of the actual user base. Exhibit 15 shows that results
in line with 40%
expectations
from Internet-based sales are, on a worldwide basis, quite mixed. Fifty-four percent of CEOs
report results as expected or above expectation, but another 46 percent are disappointed.
Tracking
above
expectations
14
In the data by industry, the level of disappointment is highest in financial services, where 31
percent cite results below expectations — this in an industry that had, and still has, high
Tracking expectations of Internet-based sales.
below 46
expectations
There is a somewhat overlooked but hugely significant brake on Internet-based sales:
0% 20% 40% 60% 80% 100%
unresolved doubts concerning the security and privacy of transactions. Responding to a
Note: 50% of the overall sample stated that they did not
have Internet-based sales
question on this aspect of e-commerce, 68 percent of CEOs shared the view that these
concerns are inhibiting progress.
An effect predicted by many analysts was that the Internet link with customers would
EXHIBIT 16 CUSTOMER LOYALTY generate loyalty via virtual communities. Has loyalty increased measurably? Exhibit 16 has
Has the Internet had an impact on customer loyalty?
the answer: while 39 percent of the CEOs report gains in loyalty to their companies’ products
and services, a larger percentage — 57 percent — detect no change. [EXHIBIT 16]
Strengthened
loyalty 39%
Around half of CEOs in North America (51 percent) and in the technology industry
cluster (57 percent) report that the Internet has strengthened customer loyalty. The consumer
Weakened
loyalty 4
and industrial sector is less impressed: 35 percent of CEOs perceive greater loyalty, but 62
percent see no change.
To some extent, the Internet-driven portions of the global economy are still in convales-
Had no
impact 57
on loyalty cence from one of the most spectacular collapses in value ever witnessed. The initial
0% 20% 40% 60% 80% 100% version of how Internet-based commerce would grow was based on the expected commer-
cial success of small, entrepreneurial companies — newly minted IPOs for the most part.
Large, established companies were supposed, in this model, to hire the smaller companies to EXHIBIT 17 FUTURE OF THE INTERNET
What is the impact of the Internet on the
teach them what to do. But with a few notable exceptions larger companies were expected global marketplace?
to lag behind in expertise, creativity, and Internet-related revenues. This scenario proved UNSURE REFUSED
to have inadequate staying power. Hundreds of dot.com start-ups have abruptly vanished Following the end
of the dot.com frenzy,
companies are now
being valued once
from the scene, untold millions of dollars in speculative investment have been lost, and again on historical
-7% -12 36 27 17 1
performance rather
than on potential
only the best-managed dot.com companies are still standing today. Meanwhile, the larger, for growth
established companies that were expected to apprentice with the start-ups have demonstrated
With their financial
stability, market
their ability to master the skills of Internet use across a wide range of disciplines, from supply expertise and
infrastructure,
established companies -2-5 41 32 19 1
chain management to marketing and sales. In essence, they have slipped — often without will succeed in the
e-commerce arena
where the dot.coms
much fanfare — into the space left by the dot.coms, and there these established companies — have failed
-100% -50% 0% 50% 100%

with their financial and other resources — have begun to thrive.
Not surprisingly, then, Exhibit 17 shows a majority say the valuation of companies is once
Strongly disagree Somewhat disagree Somewhat agree Strongly agree
again based on proven performance rather than growth potential (63 percent). [EXHIBIT 17] A still
larger majority say the ability to realise the promise of e-commerce rests now with established
EXHIBIT 18 BRAND AND SALES (by industry)
companies (73 percent). The views by region and industry track closely with these percentages, What is the impact of chat rooms, unofficial web
sites, “virtual boycotts,” etc. on brand reputation
although it is worth recording that 82 percent of CEOs in the technology industry cluster say and sales?
established companies will succeed where many dot.coms did not. TECHNOLOGY,
INFORMATION,
CONSUMER
& INDUSTRIAL
COMMUNICATIONS PRODUCTS
FINANCIAL SERVICES & ENTERTAINMENT & SERVICES
In some ironic way, perhaps the Internet is making a noticeable impact, after all. We can find
To a great 6% 6% 6%
wisdom in the CEOs’ responses to a survey question concerning the impact of chat rooms, extent
unofficial web sites, “virtual boycotts,” and the like on brand reputation and sales. Exhibit To some
extent 37 31 39
18 shows that CEOs responsible for consumer product and industrial enterprises are almost
Not really 32 36 29
exactly as concerned about the impact of these initiatives as are CEOs in financial services
Not at all 7 8 8
and the technology industry cluster: approximately 40 percent or more in each case acknowl-
edge either considerable impact or some impact. [EXHIBIT 18] Pardon the unscientific rule of Unsure 18 17 18
thumb, but where there are CEO concern and focus, there is almost always opportunity. 0% 50% 100% 0% 50% 100% 0% 50% 100%
the ceo
THE CEO IN AN INTEGRATING WORLD
There is an elegant and wise conversation toward the middle of the

new film The Lord of the Rings, which has played on screens nearly
worldwide. The young hero tells the aged wizard that he wishes he
lived in simpler times and did not have to face such impossible
challenges. Old Gandalf answers that it is not given us to choose
the times we live in, but it is given us to choose how we live them.
The survey has explored CEO views in a world that is not yet integrated but that is surely “THINK POSITIVE. WE SHOULD TRUST
integrating. Global patterns of business, the global reach of the Internet, the global initia-
THE MARKET AND OURSELVES. WE
tives of multilateral organisations, a new awareness of corporate responsibility in the face
ARE CREATING A BETTER WORLD.”
of social and environmental needs — these are among the successes. But much more is
needed to confront with confidence a troubled global economy, the threat of mass terror, Italy
the emergence of strident protests that nonetheless have something to teach us, and the
unforgotten reality that the planetary environment is endangered.
In the end, after an exhaustive initiative involving 1,161 CEOs worldwide, we need not
look very far for themes and messages. The opportunities are right before us: “IT WILL TAKE FLEETNESS OF MIND AND
" RECALL THE PAST, LOOK TO THE FUTURE. The world has changed in some fundamental
FOOT — TO PROACTIVELY THINK AHEAD
ways since September 11th. But as one French CEO reminded us, “Life, business will go on.”
AND TAKE THE APPROPRIATE STEPS.”
Moving organisations forward will require unprecedented leadership by CEOs and their
management teams and increased contributions by employees throughout those organisations. India
"EMBRACE CORPORATE SOCIAL RESPONSIBILITY. Companies and their CEOs wield remark-
able power; some large multi-nationals dwarf many nation-states in size, economic impact,
and influence. In our new, more integrated world, companies must put that influence
and power to good, socially-responsible use. A magic wand? Employees are sometimes
“WE NEED TO FACE THE SPEED OF BIG underutilised by their organisations and their company leadership. Give employees a
noblesse oblige, a noble obligation, and they will dedicate themselves, as knights of
CHANGES, BE MORE QUICK IN DECISION
old, to defending corporate truths and values and to fighting the good fight for corporate
MAKING, DEVELOP APPROPRIATE STRATE-
social responsibility.
GIES, AND ASSUME RISKS. WE MUST ALSO "CLOSE THE VALUE GAP. More sophisticated accounting measures are today available that
can provide all stakeholders with the kind of financial and non-financial information they
ALLOW THE FLOW OF NEW IDEAS FROM
need to make wise investment decisions. There is every good reason that companies should
ALL SECTORS IN THE ORGANISATION.”
embrace transparency and make broad financial and non-financial information available
Mexico and understandable to all stakeholders.
"RIDE THE INTERNET. The Internet is the wave of the present and the future. But consumers’
deep-seated concerns about privacy and security won’t just go away. For the Internet to
achieve its almost unfathomable promise, leaders must fully grasp the implications and
“EVEN IN TIMES OF UNCERTAINTY, challenges of a networked world. There is much work to do.
In this new reality, the CEO is a highly significant actor. He and she continue to have
OPPORTUNITIES CAN ABOUND.”
their traditional roles as leaders and managers of enterprise, serving shareholders and other
Singapore
stakeholders, building value, encouraging innovation — and doing so much else. But there
is a new role: call it the CEO as statesman. The scale and promise of business today make
clear that the world’s business leaders now figure among the world’s leaders, in the most
general meaning of the word. This is interesting; this is an unmistakably great challenge.
F E AT U R E D I N T E RV I E W
Looking at Corporate Social Responsibility

Through Experienced Eyes
I N T E RV I E W W I T H N I T I N D E S A I
U n d e r-S e c r e t a r y- G e n e r a l f o r E c o n o m i c a n d S o c i a l A f f a i r s , U n i t e d N a t i o n s
Nitin Desai has had his present duties at the United Nations since 1992. Before joining
the world organisation, he was Secretary and Chief Economic Adviser in India’s Ministry
of Finance, and also served as Deputy Secretary-General of the 1992 United Nations
Conference on Environment and Development (UNCED), a position to which he was
appointed in June 1990.
After early years in business and academia, Mr. Desai began his government career in
1973 in the National Planning Commission in India. He served for a time as Secretary of
the Economic Advisory Council to the Prime Minister of India. He has been a member
of the Commonwealth Secretariat Expert Group on Climate Change and has published
several articles and papers on development planning, regional economics, industry,
energy, and international economic relations. He received a bachelor’s degree from the
University of Bombay in 1962 and in 1965, earned a master’s degree in economics from
the London School of Economics and Political Science.
PwC: What definition of sustainability or sustainable development do you use in your work?
MR. DESAI: Rather than define sustainable development in terms of an end state, we consider it a
process. Every decision is valued from the point of view of its economic impact, its social impact,
and its environmental impact. So it’s not a question of defining sustainable development as a set
of parameters that have to be fulfilled, but more as a process of decision making. To us, it is not a
matter of having a programme, a project, a policy whose primary goals are economic, and then
asking yourself, “How do I take care of unwelcome social or environmental consequences?” And
it’s not a matter of having environmental policies that are sound but that have unwelcome social
or economic consequences. The real challenge is to find ways to successfully address all three.
An example I sometimes give is the problem of indoor air pollution. In PwC: In such programmes, do the three strands you’ve spoken of tend
some countries, people cook on open wood stoves, and this defeats them to be split apart by interest groups that you necessarily have to engage
badly. They have to cut the forests down, the stoves are inefficient, and with? Or is it generally possible to develop the three strands together?
women who cook on open indoor fires often inhale the equivalent of MR. DESAI: People will approach from different perspectives. The engi-
two packs of cigarettes a day. Now if I had a programme to address this, neering company that offers bio-methanation technology sees things
I would want to address simultaneously the environmental problem of primarily from the economic perspective of finding markets for its tech-
reforestation, the social problem of women’s health, and the economic nology. The municipality that buys the technology looks at the project in
problem of meeting the energy needs of a population. terms of better waste management. Citizen groups will probably be con-
This is integration, and this is what “sustainable” means. Think of it as cerned about the environmental consequences of not treating the waste,
a process. and so on. However, citizen groups may place such high value on safe
waste disposal that they may not take full account of the economic cir-
PwC: Can you give a few examples of programmes for which you are
cumstances. Similarly, the technology company may focus so much on
currently responsible that reflect this approach?
economics that it may not sufficiently value the environmental benefits.
MR. DESAI: What we are doing in the area of energy is focused on this
So people will come at it from different perspectives. But the change
type of integration. For example, we recently completed a major world
that I see over the past decade is that the corporate community increas-
energy assessment with the World Energy Council. Were you to look at
ingly realises that it needs to pursue not just the bottom line and
the recommendations in that report, you would not describe them as
shareholder satisfaction. It also has to worry about employees, about the
primarily focused on meeting energy needs, or primarily focused on
opinions of clients, about the impact on the societies of which it is a
meeting the environmental consequences of energy use, or primarily
part. Corporations today cannot command respect even among their own
focused on worrying about equity and access to energy. It asks questions
employees if they do not have a reputation for being environmentally
about all three.
and socially responsible.
We also do practical work at the country level — for instance, bio-
The tunnel-vision approaches of different parties are becoming easier to
methanation in China. Basically, what we do there is to create value
reconcile. Now there are differences of emphasis rather than tunnel vision.
from waste generated in mostly urban areas. The waste produced in poor
countries often has high organic content. You can use it to generate PwC: What is driving that change among corporations and
methane gas, which is a source of energy. This programme solves an corporate leaders?
environmental problem, which is waste disposal, and it solves a develop- MR. DESAI: Corporations realise that their success depends on what hap-
mental problem, which is energy production. pens in the marketplace — and on much else as well. It depends on the
morale, commitment, and loyalty of the workforce. It depends on the
loyalty of the customer base, and it depends on the public reputation you my peers expect me to behave — this is now the standard of behaviour.”
command. All of this contributes to the long-term success of a corpora- And that standard is changing.
tion. Corporate leaders recognise this, and they are becoming far more A decade or more ago, other managers admired the ruthless, entrepre-
sensitive to the concerns of these other groups. A large corporation is neurial pursuer of profit. Today the admired person is the manager who
simply a microcosm of society. If environmental awareness is growing in successfully combines shareholder value with environmental and social
society, if a sense of social responsibility is growing in society, these responsibility. The standard of behaviour is set really by the managers
things will be reflected in the workforce. themselves, not by people outside.
These new norms will also have to be reflected in the corporation’s
PwC: Are you campaigning for these values when you say this, or is this
thinking processes, and this is actually occurring. A corporation today
what you are actually seeing when you meet business leaders?
would never dream of using prison labour because it knows that this is
MR. DESAI: I am not campaigning. This is really how the dynamic works.
completely unacceptable to its own workforce and completely unaccept-
able to society. The same is true of child labour. Corporations recognise It has started. Let me give an example in the environmental area: I would
that their policies, their codes cannot be defined simply in terms of argue that perhaps a little over a decade ago, corporate managers who
immediate success in the marketplace. Shareholder value is important. showed a serious interest in reconciling the pursuit of shareholder value
But in the longer run, they also have to worry about the workforce and with environmental responsibility were a minority and may even have
the needs of society. been considered somewhat eccentric. Even 10 years ago, those attitudes
still stood out. What I think has happened since the Rio conference is
PwC: You must travel widely and speak with chief executives and that a small minority has become a large minority — still a minority, but
government leaders in many parts of the world. Are there regional a large one. Most corporations today show environmental consciousness
differences in the approach of CEOs to corporate social responsibility? because of the need to meet regulatory standards. I doubt that there is a
Are Asians different from North Americans? From Europeans? From major corporation today in any of the large economies that does not
South Americans? have an environmental department.
MR. DESAI: Certain differences exist. In my experience, Europeans have But what has happened in the minority of corporations is that instead
greater sensitivity to emission issues, while the focus in Latin America is of being limited to the environmental department doing audits of waste
on resource impact issues. I would say that social issues — the impact and so on, the broader issue has entered the boardroom, and it is being
on the population of industrial pollution, questions about the welfare of written into corporate policy. It commands the attention of not only the
minority groups, etc. — are probably somewhat stronger in Asia. environmental and engineering departments but also the marketing
However, there is a commonality, and one of its most powerful causes is department, the finance department, and certainly the CEO. Why is this
that corporate managers are part of a community of corporate managers happening? It is happening partly because of the impact of the environ-
around the world. The powerful factor here is a sense that “This is how mental conference at Rio, and it is happening because many successful
corporations have espoused these concerns. Our goal at the next confer- NGOs are proving to be effective, for example, in the area of resource
ence, in Johannesburg, is to push it over the top. What a large minority stewardship. There is a Marine Stewardship Council, an NGO, which
now accepts as a structure for corporate responsibility and accountability says that if you are willing to subject your company’s methods to exami-
may soon be accepted as a global norm not through legislation but sim- nation, it is ready to certify, where appropriate, that your fishing practices
ply through peer pressure. are sustainable. And companies can derive commercial advantage from
I was traveling in India and visited a medium-size company whose CEO being able to assert that they are approved by the Marine Stewardship
said that the company had recently become ISO 14000 compliant (as you Council. There are similar things in other fields. This is an area where the
may know, this is a demanding international standard for environmental NGO world and the corporate world are coming together. I expect this to
management). I asked him why, because nothing in Indian legislation evolve — in the area of corporate reporting, among others.
requires compliance with ISO 14000. His answer was very simple: If I
PwC: Another survey question asked CEOs to evaluate their own com-
want to be a global player in my business, I have to be there with the other
panies’ reputations for corporate social responsibility. Nearly
global players in terms of standards. I also have to be compliant with these
half of the CEOs said that their companies “to a great extent” have
standards because that is what my clients abroad increasingly demand.
good reputations in this regard, and another 40 percent replied
So competitive pressure in this case is the key factor — not pressure
that their companies “to some extent” fit this category. What do you
from a regulatory body or any official source but simply the wish, and
make of this?
need, to ensure his standing with clients and business rivals.
MR. DESAI: CEOs are bound to have a somewhat more rosy perception of
PwC: Our survey asked participating CEOs to rate the influence of their own companies than the world outside does. You have to discount
various stakeholders on their companies’ strategies for social responsi- this. Their notions of what constitutes social responsibility must also vary.
bility. Shareholders, customers, and board members were reported to One CEO might think that if the company is making a profit, it is socially
be highly influential. However, there was a surprise: NGOs, which one responsible because many thousands of people work for the company
might have thought to be very influential, prove to be key influencers and benefit from its success. Another CEO might have another view: “Oh
among only 1 percent of the surveyed CEOs. yes, profit is important, but I must also make sure that my corporation is
MR. DESAI: This virtually demonstrates what I’m saying: peer pressure able to do something concrete for the community whose resources it uses.
matters enormously. I would say that the NGO impact is probably I need to put something back into the community.” A third CEO may reason,
more profound on specific decisions rather than on corporate culture “My corporation cannot survive if there is continuous strife in my country,
as such — and the big change I’m seeing is in corporate culture. It’s not so I have a certain responsibility to see how I can contribute to the resolu-
difficult to reconcile your survey finding with my own observation that tion of that strife.” As you can see, I’m not at all sure that every manager
NGOs are very important and effective when it comes to specific deci- has the same conception of what it means to be socially responsible.
sions about, say, locating a plant or about technology.
What is interesting is that very few are ready to say that they are So there is a group of business leaders who become environmentally
not socially responsible. Now the challenge is to make sure that there responsible because they think they have win/win solutions. A second
is a certain commonality to what people mean by social and environ- strand is slightly different: these are people whose horizon is much more
mental responsibility. long-term, people who say, “Look, I know that what I’m doing today is
That commonality can emerge only over time. And I would suspect not part of the normal calculation of shareholder value, but I’m pretty
that it will not be the same everywhere in the world. Take, for instance, sure it’s going to become part of shareholder value 10 years from now,
what we were saying about the impact of the corporation in situations of and I’d rather do it now.” I once asked a German CEO why his company
strife. This isn’t relevant to every country, but in some parts of the world was investing in environmental practices that were not at all required —
it couldn’t be more relevant, and it might be relevant somewhere else. I didn’t this hurt his competitive standing? “No harm done,” he replied,
hope that what emerges on a regional basis is a certain shared under- “because I know that my competitors will have to come to these stan-
standing, a shared framework for what constitutes responsible behaviour. dards five years from now, and we’ll be ready with the technologies.”
So that is the second strand: people who are looking five to 10 years
PwC: Can you tell us about a CEO whom you regard as a person
ahead and doing things now to position for the future they anticipate. Both
of strong conviction and action in this realm of corporate social
of the approaches I have so far mentioned can be justified from a standard
responsibility?
business management perspective. But there is a third strand emerging: the
MR. DESAI: There are so many that to name any one would do injustice
notion that the health of the corporation depends on the health of the
to others. But I can say that I’ve encountered three types of motivations economy and society in which it operates. The reasoning goes roughly as
for injecting these issues into the mainstream of corporate policy. The first follows: “If a significant part of the problems of society arises from environ-
is the conviction that being socially and environmentally responsible mental and social stresses, and if I am ready to sacrifice some profit in
does not necessarily mean that you have to sacrifice the bottom line. order to be able to address that environmental and social stress, I can
Such people believe that win/win solutions are available, particularly on make a great contribution. But the benefit of what I might do accrues to
the environmental side. Quite a few business leaders have come to the society at large — including my rivals. Therefore I cannot take these steps
view that their companies can find these solutions when they look suffi- without a broad consensus that the steps are necessary and binding on all.”
ciently sensibly and intelligently. For example, when governments To act on this third type of thinking, you need consensus. You cannot
insisted that chemicals should be recycled in paper manufacturing expect one corporation to be totally altruistic, because rivals will exploit its
plants, the initial corporate reaction was that onerous costs were being actions for their own benefit. You need a broad consensus: all players have
forced on manufacturers. But they found in time that it wasn’t such a bad to accept that this is their social responsibility.
idea at all, because the recovered chemicals often paid for the extra steps And this will come in time. CEOs and managers are not a breed apart;
they had to take. There are other examples of this kind. they are part of society.
F E AT U R E D I N T E RV I E W
Global Views from the African Continent

I N T E RV I E W W I T H W I L F R E D K I B O RO A N D AYO A J AY I
Nowhere are the implications of the global economy and globalisation more dramatic
than in Africa, where companies and their senior leadership are struggling to overcome
economic and infrastructure deficiencies, the pall of AIDS on the continent, and wide-
spread poverty, as well as the dramatic, worldwide impact of the events of September
11th. Yet hope springs eternal, and two of Africa’s most hopeful CEOs are Wilfred
Kiboro and Ayo Ajayi.
Mr. Kiboro is Group Chief Executive Officer of The Nation Media Group, East and
Central Africa’s largest publishing and broadcast media group. He is also chairman of the
Federation of Kenya Employers, the East African Business Council, and the Media Owners
Association. In his eight years at the helm of The Nation Media Group, he has man-
aged to increase its revenue base and profitability in a difficult economic environment.
Mr. Ajayi is Managing Director and Chief Executive Officer of UAC of Nigeria PLC,
one of the oldest and largest conglomerates in Africa. He joined the firm as a manage-
ment trainee in 1972 and has risen to lead a company employing 7,000 people.
O N R E G I O N A L E CO N OM I C CO N D I T I O N S …
MR. KIBORO: Poor economic management in Kenya, growing corruption, and adverse
weather conditions, coupled with low commodity prices and a huge debt burden for the
region as a whole, have contributed to a bleak economic setting and, for businesses, a market-
place with poor growth prospects. For the region, the effects that those issues have had,
and continue to have, on business confidence are profound. But I refuse to succumb to this
pervasive mood of disenchantment. What we need are unique and innovative solutions.
MR. AJAYI: African CEOs are no different from CEOs anywhere else in O N G LO BA L I S AT I O N …
the world, but we do have the added pressure and challenge to achieve MR. KIBORO: I am less than bullish about the phenomenon of globalisa-
so much with so few resources. The business issues that keep us awake at tion itself. The basic assumptions underpinning the purported benefits of
night are the same as those anywhere — keeping our businesses running globalisation are largely inapplicable to the realities facing most African
and looking after our stakeholders. However, transplant a good CEO nations. For instance, the assumed equal access to global trade opportuni-
from Africa to the developed world and he will excel. This kind of diffi- ties seems not to apply to African agricultural producers seeking access to
cult environment is an excellent training ground for success. the European or North American markets. What’s more, Africa’s infrastruc-
ture disadvantages, poor domestic market capacities, weak institutions of
ON THE EVENTS OF SEPTEMBER 11TH … education and training, and poor access to information technology have
MR. KIBORO: Africa’s economies are inexorably linked to the global diminished the continent’s ability to tap potential globalisation benefits.
economy. The current global economic slowdown, induced by the
MR. AJAYI: Our local economies are not sufficiently developed to benefit
earlier slowdown in the American economy and the terrorist attacks of
from globalisation. African countries are still import dependent and have
September 11th, has drastically affected the growth prospects for the
ended up as a dumping ground for Western companies, as the continent
continent as a whole. Africa relies heavily on the export of primary
cannot offer much to the West with a local content. Also, African
products that include not just raw materials and minerals such as oil,
countries cannot benefit from globalisation when the cost of production
gold, and diamonds, but agricultural products such as coffee, tea, cocoa
is high, because the required basic infrastructure does not exist. The
and horticultural products. Here at The Nation Media Group, we have
basics for production, electricity, water, and a distribution infrastructure
experienced a contraction in newspaper circulation due to the local
have to be provided by companies, as government has been unable to
and regional economic environment, as well as a drop in advertising
deliver or maintain these basic services. The multinationals operating in
spending because many of the region’s multinational corporations have
the region are mere extensions of their home plants — “free trade” and
cut back following the global slowdown. I expect the same slowdown
“competitive advantage” are therefore “jargons” in this region.
for aid, which could mean great difficulties for aid-dependent countries.
MR. AJAYI: September 11th will prove to be a disaster for Africa, because O N T H E D I G I TA L D I V I D E …
the effect on the world economy will be reflected in African economies. MR. KIBORO: Our failure to reap the benefits of globalisation will
As unemployment rises in the West and people become more afraid inevitably widen the gap between the “have” and “have-nots” of
to move around the world, developing economies will feel the total the world. The inability of African economies to exploit competitive
reduction in investment. advantages in the global marketplace can only lead to greater
aid dependency, higher levels of poverty, greater domestic income MR. AJAYI: Corporate social responsibility [CSR] is important to African
disparities, and social pressures. Despite our region’s infrastructural companies, but there are constraints that make it less of a priority. You
deficiencies, our successful businesses have utilised IT solutions and just need to look at the figures to know that companies that are fighting
processes in the running of their businesses. Internet use, for instance, for survival can put few resources into CSR. Whereas CSR is part of the
has been increasingly deployed for communications and financial culture of developed world companies, African companies cannot just
processing. East Africa has seen rapid growth in the number and types apportion part of their budgets to CSR. Companies that have tried have
of electronic financial transactions conducted. often seen their money end up in people’s pockets. In developed coun-
tries, it is routine for governments to provide the basic needs such as
MR. AJAYI: Africa needs help as the gap between the rich and the poor
education, health, and law and order. In Africa these are areas where
widens — both within Africa and between the developed and developing
companies are likely to use up their CSR budgets, as governments have
world. However, this help needs to be properly placed. African countries
failed to provide and maintain these services. In my view, education
and representatives from the developed world need to sit down and
must be at the top of the CSR list, including building schools, buying
look at Africa’s strengths and weaknesses and the strategies for dealing
schoolbooks, and assisting in teacher training. Other CSR priorities
with them.
should be health security and the development of the judiciary. In the
end, leadership is the key to a prosperous Africa. Leadership permeates
O N CO R P O R AT E S O C I A L R E S P O N S I B I L I T Y …
right through an organisation, a government, a family, a church; but
MR. KIBORO: Alongside the changing ways in which the region’s
good leadership is lacking in Africa. In the past 40 years, Nigeria and
successful CEOs and companies manage their businesses, the criteria by
many other African countries have had leaders who have not put people
which they achieve recognition may be changing. While corporate social
at the centre of their interest. Africa is a wealthy continent, but its
responsibility is still a new concept, it has caught the attention of many
resources have been exploited for personal gain, and billions of dollars
regional corporations. Public perception is increasingly alert to the
have gotten stacked all over the world instead of being reinvested in the
possible roles of such corporations as socio-economic structures collapse
countries of origin.
under failing public investments, mismanagement, and population pres-
sure. The long-term benefit of participation in initiatives that directly affect
corporations’ own business activities is increasingly obvious. Large retail
chains, for instance, see benefits in improving roads that enable improved
access by consumers. Large companies see the benefit in the preventative
health care of their staff, most notably with the AIDS scourge.
PWC.CEObro.Cvrs.MECH.NEW 1/22/02 12:04 PM Page E
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Samuel A. DiPiazza, Jr.

highlights including workforce reductions and the outsourcing of non-core business

" Corporate social responsibility (“social reputation”) is an important agenda item

PwC CEO Survey • 3

The search for knowledge continues. Confronted with

IN THE WORDS OF CEOS …

“WE MUST CREATE CERTAINTY OUT

“THERE IS A CHINESE SAYING, ‘BAD

“KEEP THE DIRECTION IN THE STORM.”

technology, information, communications, and entertainment; and consumer and industrial

PwC CEO Survey • 7

EXHIBIT 2 SEPTEMBER 11TH: LONG-TERM IMPACTS Longer-Term Impacts

PEOPLE TO LOOK BEYOND THE

SHORT TERM AND TO STRIVE TO

BUILD AN ORGANISATION WHICH

WILL GROW AND PROSPER FOR

THE BENEFIT OF ALL OF THE

RELEVANT STAKEHOLDERS OVER

THE LONGER TERM.”

PwC CEO Survey • 9

Before the events of September 11th, many CEOs were already

than a decade of economic distress. Plant/office closures 27%

0% 20% 40% 60% 80% 100%

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

Little or no impact Considerable impact

The events of September 11th cast a long shadow. Every CEO

matter to 61 percent of North American CEOs — unsurprising in an environment where

report (www.chiquita.com/corpres/decide.asp) that is considered the global gold standard.

America, shareholders and customers come first — a particularly significant finding in

The rise of the Internet, the sheer power of new information

ties arise. And market valuation depends ultimately on information.

Institutional investors - 4% -10 32 32 15 6 1

-40% -20% 0% 20% 40% 60% 80%

0% 50% 100% 0% 50% 100% 0% 50% 100%

-100% -50% 0% 50% 100%

There is an elegant and wise conversation toward the middle of the

Looking at Corporate Social Responsibility

Global Views from the African Continent

About the World Economic Forum

Your worlds Our people

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