This will be my first year attending the World Economic Forum (WEF) in Davos. Since becoming PwC’s U.S. Chairman in July, I’ve spent a good deal of time listening to colleagues and business and political leaders across the country. As you might imagine, the first part of the meetings tend to start the same way — with discussions of the incoming Trump administration. We discuss that day’s Trump-related headlines, the status of his promised changes to trade and tax policies, and debate how sweeping those changes will be and how their own businesses and the world will be impacted.
And then we quickly put our heads down and get down to business. And business at home in the U.S. looks good — the glass is most definitely half full. Leading the way are CEOs remarkably focused on those parts of their businesses they can still control and influence.
That’s the point I want to make here in Davos. If they haven’t already, leaders in Davos and elsewhere should take note: U.S. CEOs are finding ways to grow, spotting opportunities and competing harder than ever. Simultaneously, the American economy has not broken its stride. The key selling point at the WEF — that the rising tide of the global economy lifts all boats — has hit rough waters. While U.S. executives I’ve spoken with are keeping an eye on the global economy, they also have another perspective. They see a Main Street unbowed by world economics. They may not see it as business as usual, but they very much still see it as business.
PwC’s newly released, 20th annual CEO Survey acknowledges this reality as well. Of those CEOs surveyed outside the country, 43 percent said that the U.S. is the most important country for the growth of their companies. Said differently, non U.S. CEOs see the same opportunities in the U.S. as those domestic CEOs with whom I am meeting. Short-term confidence has risen most in North and Latin America jumping dramatically in the survey from last year. Combine that figure with the 51 percent of CEOs worldwide who are extremely optimistic about longer-term growth prospects.
PwC’s own most recent analysis of current economic trends also points to increased business optimism in the U.S. Record-high equity markets are spurring increased investment from earnings, and the appetite for M&A activity remains strong. Small business is positive about the future and if that translates into an uptick in business spending, the domestic economy is poised for growth in 2017. Business generally added headcount in December and plan for more hiring in the coming year. In my travels from business to business across the U.S., I have not encountered a significant level of hiring freezes, only variations in the degree to which certain sectors are hiring.
There are, of course, challenges going forward. In the survey, 82 percent of CEOs see uncertain economic growth and 80 percent see over-regulation as top threats to business. For example, U.S. businesses have long been disadvantaged by a tax code that incentivizes investment overseas rather than at home. Overall, 41% of US CEOs are ‘extremely concerned’ about an increasing tax burden vs. 29% of CEOs globally. The U.S. now has the highest statutory tax rate among major economies, causing companies to park profits in overseas subsidiaries in avoidance. With 79% of CEOs telling us they are counting on organic growth in 2017, tax reform would drive increased investment domestically and further fire the economy.
Further, President-elect Trump’s vocal, populist, protectionist leanings are tempering some of the optimism felt otherwise in the U.S. economy and by his promises of tax reform and regulatory relief for businesses. The CEO Survey showed that concern over protectionist tendencies is rising among US — 27% of US CEOs said they are “extremely concerned” about protectionism. Looking ahead, CEOs are asking whether America becomes more insular, moving toward greater independence from other nations economically.
Amidst all of this uncertainty, CEOs are more sensitive to trust issues than ever before. One CEO told me recently that while he used to focus on concerns around his shareholders, employees and the market, he now has a fourth, unwieldy constituency to figure into his business strategy — society as a whole. Concern about a lack of trust harming business growth jumped from 37% in 2013 to 58% this year. Organizations are working to increase trust through strong corporate purpose initiatives. Now more than ever, there is good business in doing good.
Trump’s inauguration undoubtedly looms large at the end of this week. But while the world is fixated on the incoming administration, U.S. executives are optimistic about the future, and are hard at work maintaining and growing their businesses’ competitive edge — said differently, they are not distracted. Here at Davos, we need to follow their lead.
