CEO Leadership Redefined

Christine DiBartolo and Brent McGoldrick are Senior Managing Directors and Elly DiLeonardi is Senior Director of the Strategic Communications segment at FTI Consulting. This post is based on their FTI Consulting memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).

Society is demanding a different kind of leadership from the C-suite, especially CEOs.

People are paying close attention to what they say and what they do. This shift was happening well before 2020, but the COVID-19 pandemic and social and political unrest significantly accelerated the transformation underway.

As a firm that helps CEOs with their most complex, business-critical issues, we are often asked how CEOs and senior executives should navigate this new environment in a way that is responsive to the needs of different stakeholder groups, but doesn’t inadvertently create new risk for the business. We decided to go straight to the source and ask two of the most critical audiences, working professionals and institutional investors, about what they expect from CEOs.

Our research revealed that investors strongly believe that the job of the CEO goes beyond turning a profit, and working professionals agree. Moving forward, CEOs must take on complex societal issues, demonstrate strong corporate purpose and values, and effectively communicate and engage with their people and key stakeholders frequently.

It also shed light on some emerging differences in expectations of CEOs among various generations, which will be important to keep in mind as companies plan for the future. Baby Boomers (ages 57 to 74) have long held the majority of sitting CEO positions, but for the first time in 2020, the average age of a CEO-now 52 years-aligned with Gen X (ages 41 to 56). As Gen X steps into senior leadership positions, including the role of CEO, they will need to cater to a new generation of employees-Gen Z (ages 24 and younger)-who are motivated by personal values and focused on serving the planet through sustainable operations and their peers through diversity and inclusion efforts.

In this first installment of our CEO Leadership Redefined series, we explore the increasing expectations stakeholders have of CEOs to speak out on issues of importance, not only for the business but society at-large. Future installments will dive deeper into the role of the CEO in ESG and sustainability, political advocacy and diversity and inclusion, among others.

CEOs must create long-term value while caring for people and the planet.

Increasingly, people are turning to the CEO for leadership on issues that go beyond the business-from climate change to social justice to public health.

And, it’s not just employees wanting their CEO to speak out. The expectations that investors have of CEOs to take on complex societal issues are also changing. How CEOs address these issues through their words and actions can positively or negatively impact a company’s reputation.

CEOs and Societal Issues

CEOs won favor in the last 18 months by addressing societal issues.

Speaking out on societal issues gained CEOs more favor over the last 18 months, especially among investors.

Despite the hardships society and companies alike went through, 8 in 10 (80%) investors and over half of professionals (56%) say the events of the last 18 months brought out the best in CEOs. The actions business leaders took to address specific societal issues that occurred won them greater favor than less.

CEOs Engaging in Dialogue

A new playbook for CEO leadership is needed.

As CEOs chart their paths forward, they will need a different playbook for how to effectively lead-particularly when it comes to communication. Now more than ever before, CEOs are expected to be the voice of a company, and this is something that can’t be overlooked or delegated.

Professionals said that they want to hear from their CEO through informative emails and monthly employee town halls. However, words can only go so far. Professionals also want CEOs to communicate through their actions and behaviors to prove that what a CEO says isn’t just lip service. Externally, investors want to hear from CEOs through media interviews on a weekly or monthly basis, company-sponsored events on a monthly basis, and via the company’s website.

CEO Communicators

The trait investors and professionals alike most want to see in CEOs is “ethical”.

Beyond being excellent communicators, CEOs need to demonstrate traits other than just being financially-minded.

Both professionals and investors want to see CEOs act ethically. Additionally, professionals want to see CEOs be transparent and empathetic. Whereas investors want CEOs who are purpose-driven, passionate, and creative.

Leadership Traits

Professionals say employee wellness needs to be a CEO’s top priority, diversity and inclusion too.

While physical health was a top priority for Americans during the COVID-19 pandemic, stress, isolation, and burnout also put a heavy emphasis on mental well-being. This increased focus on physical and mental health has transferred into the workplace with professionals wanting CEOs’ number one priority to be the well-being of employees-more than any other business initiative.

CEO Priorities

For investors, they still believe the top priority of the CEO should be financial performance. However, that’s closely followed by diversity, equity and inclusion, and sustainability of operations. This aligns with the significant shift among investors in using non-financial disclosures, such as a company’s Environmental, Social and Governance performance, to inform their investment decisions.

Looking ahead, political risk will be heightened.

CEOs remain cautious about engaging on public issues in our highly charged political environment. Handled improperly, the wrong response can open the company to partisan attack. Regardless, there is a growing consensus among investors that CEOs should share their views on political issues with younger generations of employees and customers as they are increasingly receptive to CEO engagement.

CEOs Politics

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