What’s Keeping CEOs Up at Night?

At the start of 2021, inflation barely registered on CEOs’ radars. But as 2022 began, inflation has soared to the top tier of concerns.

Last year, inflation ranked 22nd on CEOs’ worry list; it’s now risen to second. What’s more, CEOs think rising prices are here to stay: 55% expect inflation to last into 2023 or longer.

The Conference Board survey also found a seismic shift in CEOs’ attitudes about remote work: Now, a third of CEOs globally expect a remote-heavy workforce after the pandemic subsides. That is nearly double the percentage of CEOs who said they had remote workforces in 2019. CEOs in the United States (53%) are the most likely to expect remote-heavy workforces post-pandemic.

The results also reveal that in 2022, labor shortages will keep the world’s CEOs up at night. Also, the survey findings confirm the shift from stockholder to multi-stakeholder capitalism is underway: CEOs globally see rising expectations from stakeholders as far more of a challenge than stockholder activism.

Moreover, CEOs are making advancing economic opportunity and equality their top-ranked ESG social priority this year. The survey reflects the perspectives of more than 900 CEOs and nearly 700 other C-suite executives. Participants weighed in on the top business threats in 2022 and their plans for growth and were primarily from four regions: North America, Latin America, Asia and Europe.

Highlights from the C-Suite Outlook 2022 report include:

1. ECONOMIC CONCERNS

Inflation concerns soar.

â–¶ U.S. CEOs: In 2022, inflation is the second top external concern. In 2021, it ranked 23rd.

â–¶ CEOs globally: In 2022, it is second. In 2021, it ranked 22nd. Here to stay: Half of CEOs expect inflation beyond 2022.

â–¶ U.S. CEOs: 59% expect elevated pricing pressures until mid-2023 or beyond.

▶ CEOs globally: Overall, 55% expect elevated pricing pressures until mid-2023 or beyond. The labor shortage is a top challenge for the world’s CEOs.

â–¶ U.S. CEOs: Labor shortages rank as the No. 1 external threat to their business in 2022.

â–¶ CEOs globally: It ranks third, behind rising inflation (second) and COVID-19 disruptions (first). Recession remains a top three risk for CEOs in China and Europe, but a lesser risk for U.S. CEOs.

â–¶ CEOs in Europe: In 2022, recession ranks as their second external concern. For 2021, it was also second.

â–¶ CEOs in China: In 2022, it ranks third. In 2021, it was second.

â–¶ U.S. CEOs: In 2022, it ranks sixth. In 2021, it was third.

2. REMOTE WORK AND TALENT

Attracting and retaining talent is consistently the top priority of CEOs across regions.

• Unanimous agreement: CEOs in all regions ranked attracting and retaining talent as their top focus for 2022. Remote work is here to stay ... and will be most common in the United States. (Nearly double the percentage of CEOs now plan to have remote-heavy workforces.)

â–¶ U.S. CEOs:

â—‹ Pre-pandemic, 2019: Just 28% of U.S. CEOs had 40% or more of their workers remote.

â—‹ 2022: Nearly double (53%) plan to have 40% or more remote after the pandemic subsides.

â–¶ CEOs globally:

â—‹ Pre-pandemic, 2019: Just 17% had 40% or more of their workers remote.

â—‹ 2022: Nearly double (33%) plan to have 40% or more remote after the pandemic subsides. The hybrid work model: CEOs expect stronger productivity but weaker culture.

• The hybrid model’s impact on productivity:

â—‹ U.S. CEOs: 38% expect productivity to increase; 23% expect it to decrease.

â—‹ CEOs globally: 41% expect it to increase; 28% expect it to decrease.

• The hybrid model’s impact on culture:

â—‹ U.S. CEOs: 51% say it will weaken culture; 18% say it will strengthen culture.

â—‹ CEOs globally: 46% say it will weaken culture; 28% say it will strengthen culture.

3. SUPPLY CHAIN DISRUPTIONS

CEOs worry about supply chain disruptions.

â–¶ U.S. CEOs: Supply chain disruptions rank as the third biggest external concern.

â–¶ CEOs globally: It ranks fourth. Most CEOs feel unprepared for supply chain disarray.

â–¶ U.S. CEOs: Just 27% say they are well-prepared to deal with a global supply chain crisis.

â–¶ CEOs globally: 29% say they are well-prepared.

4. ESG PRIORITIES

Economic opportunity and equality is the top ESG-Social priority of U.S. CEOs and CEOs globally.

â–¶ U.S. and CEOs globally: Both rank economic opportunity and equality as their first ESG-Social priority. U.S. CEOs are more likely to prioritize racial equality.

â–¶ U.S. CEOs: Among ESG-Social priorities for companies, racial equality ranks second.

▶ CEOs globally: It ranks sixth. U.S. CEOs are more likely to face stakeholder pressure about the business’s role in society.

▶ U.S. CEOs: Evolving stakeholder expectations about the business’s role in society ranks as the 11th highest external threat among 30 listed issues.

â–¶ CEOs globally: It ranks 20th among 30 listed issues. CEOs worldwide are far more concerned about stakeholder pressure than shareholder activism.

▶ CEOs globally: Evolving stakeholder expectations about business’s role (20th) outranks shareholder activism (30th).

5. UNITED STATES VS. CHINA

On some issues, the two countries, CEOs are miles apart.

More concerning for U.S. CEOs:

â–¶ Labor shortages: For U.S. CEOs, a labor shortage is the top external worry. For CEOs in China, it ranks ninth. More concerning for CEOs in China

â–¶ Global trade disruptions: For CEOs in China, it ranks as the sixth external worry. For U.S. CEOs, it ranks 19th.

“Less than 40% of CEOs believe their organization is well prepared for an inflation-related crisis,� said Dana Peterson, chief economist with The Conference Board. “Many are running organizations with workforces that have never experienced inflation’s broad influence on operations and, above all, on wages. It’s why they’re prioritizing strategies like agile teamwork to move their organizations up the learning curve.�

“Both public and private companies are grappling with tectonic shifts in the business landscape,� said Paul Washington, executive director of the ESG Center at The Conference Board. “These include a greater focus on sustainability - ranked as the seventh internal priority of CEOs globally - and evolving stakeholder expectations about a company’s role in society - ranked as the 11th external pressure facing U.S. CEOs. CEOs across the globe need to have candid and ongoing discussions with their boards and C-suite colleagues about what these changes mean for their business strategy, operations, talent, and governance - not just to reduce risk, but to create and seize growth opportunities.�

Learn more at conferenceboard.org.