In theory, CEOs of US-based multinationals should be riding high. With the non-tech market indices near record highs, many of them are finding their massive compensation packages are (finally) being justified by market returns.
Sure, interest rates are inching up and the Democrats control Congress. But all things considered, the macro-political, social and economic environment remains benign. Anybody who thinks 5.25 percent yields on the 10-year bond are a reason to complain should look at the Wall Street Journal archives, where short-term rates frequently approached the legal drinking age. Around the globe, market capitalism continues its steady growth.
And yet many CEOs somehow don’t seem to be convinced. While plenty continue to thump their chests and generally thumb their nose at the unwashed masses, several are making distinctly un-CEO-like gestures.
At the Home Depot annual meeting in late May, for example, newly installed CEO Frank Blake, trying to atone for predecessor Robert Nardelli’s boorish behavior at the 2006 meeting, apologized and was solicitous of shareholders.
Coca-Cola CEO Neville Isdell, the leader of a company that boldly conquered global markets, noted that companies needed to work on transparency and accountability. Why? Such attributes are ‘prerequisites for creating trust among all sectors of society – and trust is crucial for establishing a social license to operate.’
CEOs apologizing for rude behavior? A social license to operate? These guys are behaving less like Masters of the Universe and more like graduates of etiquette school. So what gives?
Well, nothing humbles a CEO like a slumping stock price, falling same-store sales and a market infested with hedge funds and private equity sharks eager to pick off the stragglers. Adopting a humble mien can act as a form of insulation from the inevitable barrage of criticism that will ensue if a company’s stock price continues to lag the market. More broadly, the humility of US-based CEOs, forced as it may often seem, is a reflection of the growing humility of the US economy.
With each passing year, as massive countries like China, India, Russia and Brazil continue to grow at a rapid pace, the US accounts for an increasingly smaller share of the world’s economic output. This means it is all the more important for companies that have already saturated the US market, like Coca-Cola and Home Depot, to expand overseas. But breaking into foreign markets isn’t easy, even for components of the Dow Jones Industrial Average.
As they venture abroad, they will likely encounter entrenched domestic competitors, governments that may be less than welcoming and consumers who may be suspicious. And there’s always the danger the widespread anger toward the US government may transform into anger toward US products and brands.
In other words, CEOs are treading lightly at home as they need to expand their footprints abroad.
