Many companies are larger economic entities and with potentially greater influence than the countries in which they operate. According to one estimate, 69 of the top 100 wealthiest economic entities in 2016 were corporations, not countries2. As a result, they have essentially become political actors assumed to have political agendas. The 'revolving door' between CEOs and top political appointments in developed and developing countries alike has further reinforced this perception. If top business roles are seen as stepping stones to political careers, the public will expect a CEO to behave like a politician even while they simply occupy a business seat.
Corporate leaders are looked to for social media comments and responses to political events almost in real time. In a world without social media, 'no comment', 'we are monitoring the situation' and 'our company does not take political positions' were previously reasonable public positions. This is no longer the case, and any CEO who appears unprepared on political matters of public interest may be seen as aloof at best, and inauthentic at worst.
Beyond the general public, Boards are also increasingly unwilling to accept a shift in 'external conditions' as an explanation for failing to deliver results. Many companies whose earnings were affected by the volatility of the British Pound in the wake of the Brexit vote report having tough conversations at Board level about whether they could have prepared and mitigated better. Boards have grown in confidence in their responsibility to act on nontraditional business risks such as climate change, cyber security or ethics. No longer is the ability of management to fully measure or forecast a 'new' risk seen as an acceptable response and having a list of 'known-unknowns' can be seen as shirking away from the issue. CEOs can expect Boards to want to see geopolitics appearing on the risk register, as well as mature mitigation and response plans.
Perhaps the thorniest issue of all is connecting with employees and customers by taking public positions on politicized issues. Some will expect the company to take a public position - and those that do might be on opposite sides of the issue - while others would rather see it kept quiet.
Read the full report: The CEO as Chief Geopolitical Officer (PDF 785 KB)
“Political risk is the new fox in the chicken coop. Boards that are used to routine dashboard-style reporting of operational and financial risk find there is now a more dangerous and apparently less predictable factor in play -- politics.” Lord Malloch-Brown, former UK and Global Civil Servant and now Senior Member of multiple Boards