Difference of opinion between investors and CEOs

PwC study shows investors’ views on bonuses, talent pools and value creation poles apart from CEOs

A new global survey from PwC reveals the differing views between investors and chief executives on key issues such as performance incentives, the availability of key skills and value creation.

Between September 2015 and February 2016, PwC’s “Redefining business success in a changing world” study canvassed the opinions of 438 investment professionals including buy-side and sell-side investment professionals and ratings agencies. The results were benchmarked against the views of 1,400 chief executives polled in PwC’s recent Global CEO Survey.

More than seven in 10 (73%) of investors surveyed believe a company’s purpose centres on creating value for shareholders, compared to 16% of CEOs. 84% of chief executives recognise that they are expected to address wider stakeholder needs. This is also reflected in the views of CEOs (76%) and investment professionals (63%) that future business success will be defined by more than financial profit.

The survey observes that the investment community are significantly more likely than CEOs to consider misaligned performance incentives as a barrier to change. The mismatch between the two camps reflects the strength of feeling in this area: almost half (49%) of investors surveyed in the report flagged this as a major concern compared to only 17% of chief executives.

In the area of remuneration reporting, equity investors are particularly likely to identify misaligned performance incentives as an issue (42%, compared to 28% of fixed income respondents).

This most likely reflects the tension that exists between companies and their shareholders, as well as equity capital providers’ desire to have more say on company strategy since they bear the residual risk, PwC says.

Additionally, nearly three-quarters (72%) of CEOs see availability of key skills as a threat to business growth compared to less than half (48%) of investment professionals.

The variance between CEO and investment professional opinions could be attributed to three causes, PwC believes:

• A reporting gap – companies and investors are finding it difficult to agree what information is needed in order to form accurate opinions;

• An understanding gap – investors may sometimes have the same facts as CEOs, but draw different conclusions;

• A perception gap – investors may have the facts, but do not place the same importance on them.

However, there are several areas where there is common ground. Investors and CEOs both identify the same key markets – particularly the USA and China – as key for companies’ future growth.

In addition, half (53%) of investment professionals and CEOs believe the purpose of a company is to provide value for customers.

Lastly, the impact that technology can have on investors’ and CEOs’ lives is also reflected in both groups’ relatively high levels of concern about cyber threats to business. Six in 10 investors and CEOs are concerned about cyber threats. This concern is particularly high among buy-side investors (65%).