Interview, Fireside Chat
How Corporate CEOs are Navigating the Shutdown
- Client conversations have shifted through three distinct phases over the last eight weeks:
- Initial phase focused intensely on securing liquidity and transitioning employees to remote work.
- Second phase centered on modeling short- and long-term industry impacts and planning for unforeseen variables.
- Current phase prioritizes navigating Q1 earnings calls and articulating the company story amid economic uncertainty.
- Q1 earnings season is characterized by board-level debates on capital allocation, specifically regarding:
- Potential dividend reductions or share repurchases.
- Adjustments to management compensation structures.
- Engagement with government bodies.
- Defining business outlooks for both immediate and extended horizons.
- Sector impact analysis indicates a stark disparity in client performance:
- Over 90% of clients are currently struggling due to business disruptions.
- Only 5% to 10% of clients have experienced a pickup in demand.
- Corporate boards have significantly increased their engagement levels compared to the prior year:
- Boards are actively intervening to assist management with crisis-specific issues like workforce reductions or government dealings.
- Committees of two or three experienced directors often step forward to provide specific expertise, though the full board remains highly involved in operational and financial matters.
- Future operational models are expected to evolve in phases with industry-specific adaptations:
- Approximately 95% of knowledge-work clients are currently remote, while essential manufacturing and retail sectors are already back online.
- Reopening will likely involve "red team, blue team" strategies to limit on-site personnel and enforce new safety protocols.
- Future norms will vary significantly by sector, ranging from airline operations to consulting firms.
- Mergers and acquisitions activity is currently suppressed but shows signs of emerging:
- Most clients remain focused on liquidity, making immediate deal activity premature.
- Pent-up demand for M&A and growth strategies is beginning to surface among select clients.
- Activity is anticipated to accelerate in Q3 and Q4 as industries reassess their strategic game boards.
- Strategic value drivers are shifting as certain assets and capabilities are deemed more valuable post-crisis.
- Goldman Sachs engagement methods have adapted to social distancing requirements:
- Internal communication frequency has increased to compensate for the lack of physical presence.
- Client interactions have moved to video platforms like Zoom and WebEx, though travel for in-person meetings has ceased.
- Leadership anticipates a permanent shift toward efficiency, utilizing video for routine meetings while maintaining face-to-face interactions for trust-building and complex advisory roles.