Dif­fer­ence of opin­ion be­tween in­vestors and CEOs

Financial Mirror (Cyprus) - - FRONT PAGE -

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 ten (73%) of in­vestors sur­veyed be­lieve a com­pany’s pur­pose cen­tres on cre­at­ing value for share­hold­ers, com­pared to 16% of CEOs. Some 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 eq­uity in­vestors are par­tic­u­larly re­port­ing,

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 there is com­mon are sev­eral ar­eas where ground. In­vestors and CEOs both iden­tify the same key mar­kets – par­tic­u­larly the US 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 ten in­vestors and CEOs are con­cerned about cy­ber threats. This con­cern is par­tic­u­larly high among buy-side in­vestors (65%).

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