The divergent views and priorities of investors and chief executives regarding issues such as performance incentives, the availability of key skills and value creation are highlighted in a survey by PwC.

Shareholder value a priority for who?

The study found that more than seven out of 10 (73 per cent) investors think a company’s purpose centres on creating value for shareholders, compared to just 16 per cent of CEOs who hold the same view. However, 84 per cent of chief executives recognise that they are expected to address wider stakeholder needs.

Misaligned performance incentives

Investors are significantly more likely than CEOs to consider misaligned performance incentives as a barrier to change. Almost half (49 per cent) of investors surveyed in the report flagged this as a major concern compared to only 17 per cent of chief executives. Just over two-fifths (42 per cent) of equity investors are likely to identify misaligned performance incentives as an issue in remuneration reporting.

More linkage in financial reports

Hilary Eastman, investor engagement director at PwC, said: “From our work with the investment community we know they tend to be sceptical of remuneration numbers. Businesses may have to do more to link their remuneration policies and key performance indicators to overall strategy and risk management. Investors have previously told us that they want to see more linkage generally in financial reporting.”

Investors less concerned with key skills

Nearly three-quarters (72 per cent) of CEOs see availability of key skills as a threat to business growth compared to less than half (48 per cent) of investment professionals.

PwC suggests three possible reasons for the divergent priorities and views between investors and company executives:

• a reporting gap – companies and investors are finding it difficult to agree what information is needed in order to form accurate opinions;
• an understanding gap – investors may sometimes have the same facts as CEOs, but draw different conclusions;
• a perception gap – investors may have the facts, but do not place the same importance on them.

However, investors and executives agree on some topics and both see the US and China as most important countries for future business growth and both see technological advances and demographic shifts as the top two global trends.

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CTMfile Take: Financial reporting is one of the key data sources upon which investors base their views and priorities. Corporate treasurers and CFOs may find it interesting that investors would like to see more linkage from financial reports to other business indicators, such as bonuses.