Ten Questions That Every CEO Should Know How to Answer
n conclusion, we offer ten questions about sustain- able value creation that every CEO should know how to answer. The questions synthesize the basic arguments and recommendations made in this year’s report in a concise format.
Do you know the historical sources of your company’s recent TSR performance? Have you been optimizing total business performance across all the drivers of TSR in an integrated fashion?
Have you set an explicit TSR target? Is it realistic considering your past performance, your current starting point, and the future potential of your business?
Can your current momentum and business plans de- liver against that target? If not, how will you fill the gap? Do you know the likely contribution of each of your business units to overall company TSR?
What is your TSR sustainability profile? Do you know what will be the main drivers of your future TSR? Are you confident that these drivers will deliver your target TSR over the long term? If not, have you begun to identify the necessary changes to en- sure long-term sustainability?
5. Have you assessed the likely impact of a near-term change in your valuation multiple on your ability to deliver sustainable TSR? Do you have contingency plans in place to adapt your value-creation strategy should such a change occur?
Is your future TSR profile aligned with the priorities of your current investors? If not, do you need to change the profile so that it is more appealing to current investors? Or do you need to migrate to a new in- vestor mix?
Are your financial policies—such as debt-to-capital ra- tio and dividend payout—aligned with the pathway to sustainability most appropriate for your business?
Do your operational performance metrics reflect each business unit’s actual contribution to overall TSR? If so, are those metrics also part of the incentive com- pensation plans for your managers?
Are your other management processes—such as plan- ning, budgeting, and capital allocation—designed around criteria that are based on contribution to long- term TSR?
10. Have you translated your strategy to deliver sustain- able TSR into a detailed multiyear timeline of business and financial moves? Do your employees understand the logic behind the strategy? Do your investors?
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