CEOs think the worst is over

2010

CEOs the world over are confident that the worst of the recession has passed and that their businesses – and often their headcounts – will both grow during 2010. But while some lessons seemed to have been learned from the crisis, in other ways it is still very much "business as usual".

PricewaterhouseCoopers' 13th Annual Global CEO Survey has found that more than six out of 10 CEOs (63 per cent) think that 2010 will mark the start of an economic recovery with almost a third (31 per cent) saying they are 'very confident' they would achieving revenue growth over the coming 12 months, a significant increase from last year.

Overall, eight out of 10 CEOs are confident of their prospects for the year, with fewer than one in five (18 per cent) still pessimistic.

But striking a strong note of caution, six out of 10 of the 1,198 business leaders surveyed felt that recovery would be delayed until the second half of this year, while two-thirds said that they still feared a lengthy recession.

The same cautious optimism is reflected in employment prospects for 2010, with four out of 10 CEOs expecting to increase their headcounts compared with a quarter who still expect to make job cuts.

In Brazil, six out of 10 CEOs expect to be hiring this year, with almost half in Asia-Pacific, Canada and Australian saying the same thing.

European business leaders are far more cautious, however, with only around three out of 10 firms in France, Italy and Spain planning to boost recruitment. And in the UK, a mere one in five CEOs expect to increase their headcount by more than 8 per cent.

"The fears of a global economic meltdown have receded and CEOs are more upbeat about their prospects," said PwC's Chairman, Dennis Nally, "Emerging economies are clearly recovering at a faster pace than those that are more developed."

The survey also examined what the post-recession environment might look like and what lessons – if any - CEOs have learned over the past two years.

Unsurprisingly, risk emerged as a major theme. PwC found that many CEOs have rethought their approach to risk and accept that they need to plan better for volatility. "CEOs have begun to reshape not only their strategies, but also their capabilities," PwC said.

"That doesn't mean CEOs will become risk averse; rather, they may become more deliberate in examining alternatives, formulating a Plan B, and ensuring they can execute on it." There also appears to be a growing realisation that cutting costs too deeply is counter-productive. "I've discovered that you can't actually reduce your costs dramatically and still remain profitable," observer one UK-based CEO.

A majority of CEOs – especially those in the banking sector – now think businesses and governments can successfully work together to mitigate risk (as well they might after the billions they have received from taxpayers).

But while government rescue is one thing, regulatory reform is quite another. In fact over-regulation emerged from the survey as the biggest single threat to growth. Concerns over protectionist tendencies are also up ten percentage points on last year.

When it comes to the need to rebuild trust in business, however, many CEOs seem to be in a state of denial. No CEOs from Canada or Brazil, and very few from China or Hong Kong, felt there had been any significant decline in trust in their industry. Given the relatively minor impact of the recession in these areas, that might not be particularly surprising.

But the fact that just six out of 10 CEOs in banking and capital markets felt that trust in their industry had declined as a result of the recession begs the question where the rest have been for the past two years.

Another perplexing finding is that many CEOs still seem oblivious to the damage that their remuneration packages do to their own and their organisations' reputations. Fewer than a third of CEOs who recognised a decline in public trust said they were changing compensation practices in response; even in the US, fewer than half (44 per cent) of CEOs who acknowledged a decline in trust said they would be changing their pay practices as a result.

So much for "the new normal". As far as their own pay packets go, it seems that CEOs are keen that it's business as usual, whatever the consequences.