Ever since the financial crisis began, and now with Groupon CEO Andrew Mason's resignation/termination, there has been a much greater focus on corporate chief executive officers. Their performances are under great scrutiny, and some have even been called to testify before congressional committees to justify their actions. In the past, increasing revenues and profits were the most important benchmarks for CEOs. Today, the media, the federal government, unions, and religious organizations constantly analyze companies. Being a CEO has become a much more complex job.
CEOs must be sensitive to a wide array of financial, social, and political issues far beyond growth trends. Here are 10 issues that have been surfacing more frequently in recent years.
1. Increasing emphasis on short-term prospects. This is not a new item. For years, analysts said they were most concerned with the long-term potential of a company; but they always kept a close eye on short-term results. Today, the façade is gone, and improved performance on a quarter-by-quarter basis has become paramount. And, corporate turnarounds of very large companies must happen almost immediately to satisfy stakeholders. Finding a balance between the present and the future is critical for CEOs.
2. Opportunity for women and other minorities. Bringing diversity into the workforce is paramount for CEOs. In many cases, CEO performance evaluations by boards are greatly influenced by success in this area.
3. Fraud detection. One of the worst criticisms of a CEO relates to lack of control and compliance that result in large losses. Many have occurred in recent years at some of the most respected companies in the world.
4. Income disparity between management and workers. Managers of companies have always been paid significantly more than common workers, and rightly so. However, someone began calculating the multiplier pertaining to the differences between management and worker salaries. This overly theoretical and naïve analysis has been a headache for CEOs in recent years and has often been cited by liberal politicians and union leaders alike.
5. Independence of boards of directors. CEOs have dominated their boards for years often using them as rubber stamps for their compensation and operating policies. This has changed dramatically recently as boards now feel obligated to be more independent. Separating the Chairman and CEO positions is the latest trend in this area.
6. Increased social activism. CEOs are more respected when they are sensitive to social trends outside of their companies. Issues like same sex marriage are now freely discussed by CEOs.
7. Risk. Risks appear in many forms. The common ones include operating, leverage, credit, and interest risk. Now, CEOs must be mindful of geo-political activities that could affect their businesses.
8. Core businesses. Conglomerates are looked down upon currently because they are difficult to assess. CEOs believe the financial community will value their companies more favorably if they stick to their core businesses.
9. Transparency for investors. Investors want to know what is happening and punishes companies that are too secretive. CEOs must respond to this demand or suffer the consequences.
10. Government interference. The amount of lobbying done by corporations is under great scrutiny. Neither the federal government nor the public appreciates excessive interference. CEOs must temper their activities.
CEOs have been dedicating greater and greater amounts of time and energy to things seemingly unrelated to their businesses. This entails a huge amount of public relations and government relations for larger companies. Hopefully, these issues do not take away from CEO efforts to satisfy their shareholders with higher stock prices.