Five takeaways from the conversation include:
1. There is cautious optimism on economic recovery
None of the executives expect a prolonged downturn. In fact, 90% expect a gradual US economic recovery over 2021 and 2022. The emphasis there is on the word gradual; only 10% predict a rapid recovery in 2021. Taxes should be on the radar, however. Ricker warned that state and local governments face a $150b shortfall that likely will require a combination of spending cuts and tax increases to balance their budgets. At the federal level, if Democrats were to control both chambers of Congress, the Biden tax proposals for an increase to the corporate tax rate of 28% would be possible, she said.
2. Digital transformation is top of mind for CEOs
Accelerated actions and real enthusiasm around digital were evident at the roundtable. As one CEO remarked, “We now see real benefits and a strong business case for application of new digital tools, both external- and internal-facing, that were not available to us five years ago, mostly resulting from improved applications of artificial intelligence and predictive analytics.” CEOs across industries said they are investing and driving digitally enabled transformations.
3. Potential impact on commercial real estate
Executives recognize new ways of working and more flexible work environments in the wake of the pandemic, but this was tempered by their concerns about the impact on culture, new employee engagement and team productivity. A CEO in global commercial real estate management suggested that while there may not be a return to pre-COVID-19 office realities, it is possible companies will see roughly 80% of employees return to the office, in a less dense way, after the crisis.
While some CEOs did not see benefits from reduced occupancy, a key point was raised by another CEO that “a 20% reduction in commercial real estate will be a big deal.” The CEO of a global industrial products company remarked that they have not seen significant changes in non-residential real estate in other parts of the world experiencing economic recovery. This CEO concluded, “The key trend to watch is the future of urbanization and population growth.”
4. Caution on trade
The roundtable did not expect dramatic changes in either posture or policy across nations on trade. There is a general expectation that incentives for US manufacturing, especially in critical industries will continue to have bipartisan support. There was a debate on whether the combination of tax and trade policies from the new administration would really drive onshoring to the US or whether trade tensions with some countries vs. others would only drive reshoring from one offshore location to another.
5. ESG will make a comeback
One CEO noted that while COVID-19 in the US has put environmental, social and governance (ESG) concerns on hiatus, the topic “will be back with a vengeance. The environmental pressure has not gone away. We view it as a journey. We are trying to partner with companies and customers who are walking down the path, and we walk with them.”
Most others concurred. Leaders agreed that significant capital is available for companies with a purpose and genuine efforts would be appreciated by investors and communities alike. Another CEO remarked, “We do a lot in Europe, and they are as aggressive if not more with the European Green Deal. I expect ESG to come back to the US priority list, especially under a Biden administration.” A financial services CEO summed it up best: “Millennials and Generation Xers are asking what we stand for, trustees of big pension plans are being very aggressive, and we have seen no sign of that abating. Even people renting buildings are sensitive to how green they are … this is not going away.”