CEO Insights for What's Ahead | 11.09.22
US households plan to spend $613 on gifts this holiday season. That’s down considerably from the $648 spent last year, according to our annual Holiday Spending Survey.
Non-gift spending increases: While Americans plan to dial back on gifts, high inflation and surging food prices will prompt them to spend more on non-gift items. Indeed, households plan on spending $20 more this year—$393 in total—on items like meals, decorations, and wrapping paper for the holidays.
The mall makes a comeback? Just 39 percent expect to purchase more than half of their gifts online this year—the lowest proportion since 2018. So, while consumers are entering this holiday spending season in more cautious spirits overall, malls and in-person retailers may still find reasons for cheer in 2022 after weathering the COVID years.
As shown above, base salary has become a less important part of CEO compensation. By contrast, performance-based compensation (including annual bonus and equity-based awards) now represents nearly 78 percent of CEO pay in the Russell 3000.
The problem is that many companies’ performance-based compensation programs were built for fair weather, when economic and stock market conditions were good. With the crosswinds of inflation, looming recession, and ongoing war and supply chain disruptions, compensation committees need to build “resilience” into their executive compensation programs.
The path forward: Compensation committees should set reasonable performance ranges, which provide executives with some level of cash and equity payouts if the company has strong relative performance, without the committee having to resort to adjustments, discretion, or special grants. Investors are tiring of “one off” changes to executive compensation programs, which have helped to drive down average support for say-on-pay proposals across the S&P 500 and Russell 3000.
Price is a crucial factor in any purchase decision, especially when it comes to buying sustainable products, which are typically priced higher. According to our recent US consumer research, conducted with the Harris Poll, high inflation has dampened interest in buying sustainable products, even among millennial, urban, and Hispanic consumers—segments traditionally supportive of sustainability.
The dilemma: Sustainability enthusiasts are not only crucial because of their own purchases of sustainable products. They can also be important as “influencers” to peer consumers to inspire more sustainability-oriented purchases.
How to resolve it: Companies could consider special promotions to prevent losing sustainability enthusiasts as both customers and “sustainability influencers,” especially in economically challenging times. Apart from keeping these customers loyal and maintaining their potentially positive impact on peer consumers, such special offers could create long-term goodwill with these segments. These offers could signal a brand’s appreciation of these customers and commitment to them during tougher economic times.
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At 2022’s start, US CEOs ranked labor shortages as the top external threat to their business. Indeed, this shift of bargaining power from employer to worker drove soaring voluntary quit rates. But as the country now faces a recession—and the hiring freezes and layoffs that often come with it—some of this high turnover may slow: 29 percent of workers recently surveyed say the economic slowdown makes them less likely to leave their job.
What we’re saying: “Workers may be opting to stay put as they see more and more headlines announcing layoffs, but that doesn’t mean they intend to stay long-term,” said Rebecca Ray, Executive Vice President of Human Capital at The Conference Board. “More than a third indicated that their intent to stay at their current job decreased in the last six months. Businesses should focus on employee engagement and company culture now to prevent an exodus of workers once the downturn ends and the pendulum swings back into employees' favor.”
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As the US emerges from the pandemic, leisure travel has made a strong comeback. But international and business travel aren’t expected to reach pre-pandemic strength until 2025 and 2026, respectively. The challenges facing the travel industry and its role in hurting the US economic recovery are covered in a new Sustaining Capitalism podcast by the Committee for Economic Development, the public policy center of The Conference Board (CED), featuring Jamie Mageau, Director of Research Products at the U.S. Travel Association.
Work and travel visa delays are part of the problem: The US is facing long wait times for travel and work visas. Travel visa delays are hurting tourism, while work visa delays are impeding the ability for more international workers to come to the US and ease labor shortages.
The path forward: Recently, the Department of Homeland Security made progress on the work visa issue by releasing nearly 65,000 additional H-2B temporary work visas for fiscal year 2023—the largest-ever increase in supplemental visas. But for travel visas, much work remains. If the US reduced visa wait times to under 30 days, it could gain an additional two million visitors and $5 billion in spending.
QUOTABLE
“America actually used to be known as the country where the customer is king. But that doesn't seem so much the case anymore—for example, the American consumer satisfaction index is at a record low right now. And this has been running for 30 years.”
— Denise Dahlhoff, senior researcher at The Conference Board Marketing & Communications Center. Dahlhoff joined the CEO Perspectives podcast for a conversation on customer service—or the lack thereof—in the US.
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