Today, the CEO's life is much more complex. Looking out for shareholders is not enough; a progressive corporation must also consider its stakeholders, the wider community of those with a legitimate interest in an enterprise's business and its impact on people and the environment. Leading a company is naturally much more challenging. Technological advances, the expansion of global trade and trading regimes, demographic trends, the changing geopolitical landscape and shifting social norms have rendered many classical ways of doing business insufficient, inefficient or even obsolete. "We haven't abandoned leadership, but we've given leadership more information about what it needs to respond to," said Goldman Sachs Group Chairman and CEO Lloyd C. Blankfein.

But the proliferation of information is only one factor. The proliferation of pressure points and the globalization of business are driving companies to restructure and revise their operating methods. Topdown hierarchies are giving way to fresh ways of collaboration and innovative partnerships both within and between companies, across borders and cultures, and among the private sector, government and civil society. "The CEO is no longer the master of the universe," said Cristóbal Conde, President and Chief Executive Officer of SunGuard. "The number one operating job is to keep, maintain and enhance the collaborative systems where people share know-how and work together on common programmes. That's the role of the CEO in the new world."

Common endeavours may range from research and development to long-term strategic planning. Climate change is an example. This year's Annual Meeting signalled that, in the absence of strong and cohesive global political leadership on the issue, business is squarely leaping from awareness to action. As energy costs have mounted, public attention has focused on environmental degradation. For successful enterprises, practising sustainability has become more than savvy public relations; it is a business imperative, even a matter of profitability, in both emerging and established markets.

This requires inventive thinking - new carbon trading programmes are an example - and a willingness by incumbents to work with rivals and unfamiliar players. The recent decision by major US energy companies to create a "cap-and-trade" system aimed at reducing greenhouse gas emissions by as much as 30% within 15 years and the launch at Davos of the Climate Disclosure Standards Board may in future be regarded as landmark steps in the business community's acceptance that on this crucial global challenge they must lead.

Carbon Reporting: A New Standard

The World Economic Forum launched an international partnership of seven organizations to establish a generally accepted framework for climate risk-related reporting by corporations. (Press Release) Founding members of the Climate Disclosure Standards Board (CDSB) include the California Climate Action Registry, Carbon Disclosure Project, Ceres, The Climate Group, International Emissions Trading Association, World Economic Forum Global Greenhouse Gas Register and World Resources Institute. CDSB members have agreed to align their core requests for information from companies to ensure that they report climate change-related information in a standardized way that facilitates easier comparative analysis by investors, managers and the public. The focus will be on the disclosure of the following key climate issues in company annual reports: Total emissions Assessment of the physical risks of climate change Assessment of the regulatory risks of climate change Strategic analysis of climate risk and emissions management Although in recent years awareness of the importance of climate-related disclosure has risen sharply among corporations and their boards and shareholders, reporting of comparable information in annual reports remains the exception rather than the rule. The CDSB will convene an advisory committee to include industrial, financial services and accounting firms as well as other key stakeholders. In preparation, CDSB members met in Davos with representatives of Alcan, American International Group (AIG), Capital Group, Duke Energy Corporation, Ernst & Young, Royal Dutch Shell, JPMorgan Chase, PricewaterhouseCoopers, SUN Group, Swiss Re and Tokyo Electric Power Company. They also conferred with UK Secretary of State for Environment, Food and Rural Affairs David Miliband, California State Assembly Speaker Fabian Núñez, and UN Environment Programme Executive Director Achim Steiner. Climate Change Initiative

Indeed, CEOs today function less as architects of rigid policies and guardians of orthodoxy and are more and more "meaning makers" who build adaptive, innovative cultures. Top managers cannot rely on old command-and-control techniques to respond to the growing power of tech-empowered consumers and the increasing demands of investors and employees. Take the pressures from customers. That the consumer is the central focus of business is not new, said Coca-Cola International's President and COO Muhtar A. Kent. "Our business is always driven by the consumer." What has changed in recent years is the increasing ability of users, consumers and citizens to articulate preferences and shape business. In some markets, they can literally make or break a brand overnight. "We understood very early on that the only assets we have are our brand and the trust of our customers," explained Eric Schmidt, Chairman of the Executive Committee and Chief Executive Officer of Google.

Technology has obviously played a major role in the empowerment of the consumer. Web 2.0 - Internet platforms such as Facebook.com and MySpace.com in which users determine their own environment and create not just their own content but their own communities - is perhaps the newest driver of rising consumer power. Users no longer depend on companies to determine their Web experience, but instead can customize the products and services they use or create blogs that challenge the very legitimacy of a company they might choose to take on. (Webcast I Session Summary)

Businesses also face increasing pressure from shareholders through regulatory requirements such as the disclosure rules under the Sarbanes-Oxley Act in the United States. Though filing procedures are burdensome, the result for business is not necessarily negative. K. V. Kamath, Managing Director and Chief Executive Officer of India's ICICI Bank, explained that his company tightened procedures to meet Sarbanes-Oxley standards. "The pluses outweigh the minuses," he argued. For other public companies, however, the pressure of these regulations and the demands of shareholder accountability have spurred them to consider going private.

Finally, employees are increasingly another source of pressure on management. They not only possess new technologies for organizing but are also amassing new bargaining strength due to what many business leaders perceive is an international shortage of talented workers. Participants offered anecdotal evidence of the strengthened role of employees. One company adopted environmentally progressive policies due to grassroots organizing by employees. Another posted its entire employee manual online as a "wiki" online document so that any member of the company could modify procedures.

Many businesses have shifted away from hierarchical organization models to looser networks of collaborators, Harvard Business School Professor Rakesh Khurana argued. "We are at an inflection point where the right organizational model is up for grabs." The net effect of these shifts is that the traditional topdown business organization tends to be less efficient. Meanwhile, companies must be increasingly responsive to their constituencies.

Increasingly, these constituencies are in communities that may be far removed from a company's nominal base. The globalization of business through direct investment and mergers & acquisitions has meant that companies must now cater to stakeholders across the world in both established and emerging markets (see Figure 5). This has led to controversies over national security, the use of state money by enterprises purchasing stakes abroad, and the economic consequences of cross-border takeovers including job losses and cultural differences.

These concerns have underscored the challenge of human resources management, particularly in fast-growing emerging markets. In hyper-growth companies with up to triple-digit growth rates, attracting and retaining talent is enormously difficult. Turnover rates for these companies can run as high as 100%. "If companies think the market for talent is competitive now, they'd better watch out," said Saeed Al Muntafiq, Chairman of Tatweer. "It will be a lot more competitive in 10 years."

With all these management challenges and the proliferation of risks that the CEO must keep on top of, it is no wonder that private equity investment has exploded in recent years (see Figure 6). Private equity accounted for roughly 20% of global merger & acquisition activity in 2006, up from 3% nearly a decade ago. Private investment certainly offers advantages over public ownership in today's business environment. Managers can focus on direct operation of the business rather than regulatory requirements such as Sarbanes-Oxley. New ownership allows struggling companies to reinvent their images for a more competitive market. Private owners offer more unified input, in comparison to scattered shareholders. Private finance fuels innovation, with private equity backing roughly half of all IPOs in the US last year alone.

But at Davos, there were voices questioning whether private investors who may have a keen eye on the bottom line give appropriate consideration to hidden costs - and necessary goals - such as environmental sustainability. Public companies may be feeling more pressure from these newly powerful market players, and managing boards may be driven to consider "buyout scenarios" and the potential benefits of being privately held. Yet public or private, companies today are subject to extraordinarily diverse pressures and demands to which they must respond. These include the need for transparency in a world of empowered consumers and employees, the growing acceptance that sustainability means profitability and a corporation's responsibility towards multiplying stakeholder groups.

Understanding the Future of Financial Services and the Financial Markets

Increasing Internet access, the rise of mobile technologies and digital security concerns have fuelled questions as to how technology and innovation could shape the future of financial services. Thus, 56 partners of the World Economic Forum from the IT and FS sectors, together with experts from across the world, collaborated to produce three contrasting worlds: one dominated by a small number of global universal banks; another with many highly specialized, interconnected service providers; and a third where regional blocs innovated at different speeds. These scenarios have provoked much interest in follow-up work, especially around the following points: The degree of consumer trust in digital transactions cannot be taken for granted. How identity security is resolved will substantially shape which technologies consumers will demand to access financial services. Robust strategies are needed to drive financial inclusion for the next one billion; these strategies need to be original and correspond to specific, local needs. The World Economic Forum is working with the government of India, IDRC and others on a draft proposal. Similarly, uncertainty surrounding the huge growth in alternative investments such as hedge funds and private equity vehicles has sparked political calls for greater regulation and scrutiny. Hedge funds manage 30 times more assets today than they did in 1990 and private equity accounted for about one-fifth of global merger and acquisition activity in 2006, up from 3% nearly a decade ago. Indeed, the sharp growth of private equity investment in recent years has triggered a global debate about the transparency and accountability of privately held companies. To better understand these trends, the World Economic Forum Investors Industry Partnership announced the launch of the Globalization of Alternative Investments (GAI) project. Supported by investor groups, this initiative aims to collect information on, and deepen understanding of, corporate ownership models that offer alternatives to classic public ownership. Working through the Forum's Global Competitiveness Network and Global Risk Network, participants in the GAI will engage policy-makers, academics and regulators to assess accurately the investment environment in various countries and the real impact of alternative investments on global and regional financial systems. The Globalization of Alternative Investments' first project will study the global economic impact of private equity investment. This will include roundtable discussions within the investor community and with key policy-makers and experts.

Partners in the Fight Against Corruption

"Corruption is Africa's No. 1 problem - above HIV/AIDS, above malaria, above catastrophe and conflicts." Bono, Musician, DATA (Debt, AIDS and Trade in Africa) At the World Economic Forum Annual Meeting 2007, participants pushed forward ongoing initiatives to fight corruption and its negative impact on fair competition, development and economic growth. In Davos, musician and anti-poverty activist Bono pointed out that "corruption is Africa's No. 1 problem - above HIV/AIDS, above malaria, above catastrophe and conflicts." The heads of the "Big Four" global accounting firms - Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers - agreed to work with the World Economic Forum Partnering Against Corruption Initiative (PACI) to support the global fight against corruption. Together, the PACI and the accounting firms will explore the development of a mechanism for companies to benefit from independent reviews of their anti-bribery programmes. The presidents of the World Bank, the African Development Bank, the Asian Development Bank and the European Bank for Reconstruction and Development, as well as the Executive Director of the International Finance Corporation, reaffirmed their support of the PACI and recognized the important role the private sector plays in guiding policy and assisting governments in reducing corruption. These international financial institutions and the PACI agreed to implement country-specific anti-corruption programmes and sector-specific structural reforms to promote fair competition and transparency. In addition, the banks will explore ways to use the PACI's frameworks and tools as a basis for developing their own initiatives. To date, over 120 CEOs have signed the PACI Principles, committing to implement a zero-tolerance policy for bribery and to develop and maintain a broad-based, practical anti-corruption programme in their organizations. PACI

"The CEO is no longer the master of the universe. The number one operating job is to keep, maintain and enhance the collaborative systems where people share know-how and work together on common programmes. That's the role of the CEO in the new world."
Cristóbal Conde, President and Chief Executive Officer, SunGuard, USA

"We haven't abandoned leadership, but we've given leadership more information about what it needs to respond to."
Lloyd C. Blankfein, Chairman and Chief Executive Officer, Goldman Sachs Group, USA

"We have to move the social protections from the basis of the corporation to the basis of society."
Joseph E. Stiglitz, University Professor, Columbia University, USA

"Climate change and the implications on business process and disclosure are finally becoming the topic of discussion that they deserve to be. We are enthusiastic and supportive participants in this dialogue."
Paul J. Ostling, Global Chief Operating Officer, Ernst & Young, United Kingdom, and Willem Bröcker, Global Managing Partner, PricewaterhouseCoopers, Netherlands

"This is a welcome effort to streamline the growing demands on companies and to improve objectivity for disclosure of climaterelated information."
Jorma Ollila, Chairman, Royal Dutch Shell, Netherlands