While the increased spending generally reflects a more bullish outlook among chief executives, survey respondents expect future revenues, as well as their own investment decisions, to be af-fected by global and U.S. economic conditions. Although most CEOs continue to see the U.S. as an indispensable market, the number of them who believe that U.S. economic conditions will affect their growth “much more” in the coming year has dropped to 56 percent from 75 percent last year. Going forward, Douglas Bergeron, CEO of VeriFone Systems Inc., expects the most demand for his company’s electronic payment solutions to come from China, Brazil, Turkey, India and Mexico. Bergeron is especially focused on China’s booming urban markets, notably Beijing and Shanghai. “I don’t want to say the U.S. is at zero for us, but it’s not as important as growth in these other areas,” he says.

For the first time in modern history, the U.S. economy is failing to lead the world out of recession, notes Mark Zandi of Moody’s Analytics. But Zandi remains sanguine about the sole superpower’s economic prospects. “Yes, there are jobs in construction and manufacturing that are never coming back,” he says. “But growth will be created in the U.S. from demand overseas in emerging markets. As economies like Brazil and China continue to grow and get wealthier, demand for our agricultural equipment, satellites and materials will broaden into management consulting, engineering and other services.”

Key Concerns

During last year’s recessionary trough, CEOs in our annual survey overwhelmingly (81 percent) cited operational efficiency as the key internal factor affecting profitability over time. This year business leaders are paying more attention to new technology adoption, product development, advertising and marketing, and strategic partnerships. Case in point: Ivan G. Seidenberg, chairman and CEO of Verizon Communications Inc. (VZ), has opened his company’s network to outside developers and smartphone makers such as Motorola Inc. (MOT). Seidenberg has also joined with partners including China Mobile Ltd. (CHL) to create a Joint Innovation Laboratory intended to foster mobile application development worldwide. According to Verizon, the idea is to create a common software platform that mobile carriers can use to launch application stores that will offer a broad range of mobile widgets — that is, small, Web-based applications that give consumers access to information such as weather guides, stock prices and flight schedules. “Our industry is building the smart networks that will be a platform for growth, not just for Verizon but for America and the world,” Seidenberg says.

On the dealmaking front, eight in 10 CEOs feel good about the M&A outlook through 2010. “Last year we were all about conserving cash,” says BorgWarner’s Manganello. “It’s better this year.” After walking away from a deal last year “at the altar,” Manganello recently acquired an emissions company with annual revenues of $180 million that should help BorgWarner expand its operations in Spain, Portugal and India, he notes. “There’s still a bit of an inflated sense of value among sellers,” the CEO says. “We’re not bottom feeders, but we don’t overpay either.”

Sustainability Efforts

Overwhelmingly, the CEOs in our survey express strong commitment to environmental sustainability. Two-thirds of them say their motivation is simply that it’s the right thing to do. About 60 percent say sustainability initiatives are important to their company, and a little more than one-third say they’ve put green programs in place because their customers expect them to.

Sustainability spending plans vary widely by industry, with 68 percent of manufacturing, construction and mining companies planning to spend more on environmental compliance and other green initiatives in the coming year, versus 56 percent of energy/utilities companies and 35 percent of banking, real estate and insurance firms. Actions speak louder than words, of course. Clint Sidle, director of the leadership program at the Johnson Graduate School of Management at Cornell University, says that business leaders generally want to do “the right things for the right reasons” but often go awry. “When a CEO isn’t clear on what the company’s contribution is to the world — whether it’s providing financial liquidity in the case of a bank or promoting and protecting health with a pharmaceutical company — they start to make little compromises along the way, and that often includes compromises when it comes to environmental issues.”

Many CEOs argue that commercial viability requires an active commitment to sustainability. “As you bring products and services to market, all will have to go through the sustainability test,” says Ben Verwaayen, CEO of Alcatel-Lucent (NYSE Euronext: ALU), a global telecom equipment and services provider based in Paris with $18.5 billion in 2009 revenues. “If not this generation, certainly the next generation of consumers will demand that.” Alcatel-Lucent recently demonstrated its commitment to sustainability by developing an industrial-scale program to build mobile telecom base stations powered by alternative energy. In March the pilot program won the European Commission’s 2010 Sustainable Energy Europe competition.

Alcatel-Lucent is not alone. “It just makes sense that a company like ours that is about improving fuel economy and reducing emissions should be green in other ways,” says BorgWarner’s Manganello. New BorgWarner plants in China and India recycle cutting fluids and water, and many of the company’s buildings in Europe and the U.S. are built with solar panels to generate energy. Interestingly, just 14 percent of CEOs whose companies have sustainability programs put them in place primarily at the urging of their boards. Says Manganello: “We try to run our business properly and proactively. I shouldn’t need the board to tell me how to do that.”