CFOs Sustain Optimism

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The first quarter CFO Outlook Survey reveals that corporate America is showing sustained optimism for the economic and company-specific growth. The survey’s index of economic optimism trended upwards for the second consecutive quarter, reaching 71.06 out of 100, while individual company optimism rose slightly to 78.12 percent, the highest level in almost two years.


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The survey, conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business, found that 77 percent of the 200 Chief Financial Officers (CFOs) surveyed expect their companies to hire more people over the next 12 months, at an average increase of 4 percent. Three out of four CFOs also expect their companies to increase their capital expenditures. The average increase of 7 percent, however, is a lower expected increase than the previous quarter. In addition, 71 percent of respondents report their companies plan to increase the prices of their products an average of 1.5 percent, pointing to modest inflation.

“The survey shows CFOs are very bullish about their companies and the economy,” notes Burton Rothberg, Assistant Professor Accounting at Baruch College. “The rub comes from their predictions of only a modest increase in interest rates. We should note, however, there is a significant minority of CFOs who expect more tightening. How all this plays out will be interesting to watch in the months to come.”

Strong Feelings on Executive Pay Proposals

“In general respondents acknowledged the problem of excessive compensation but felt responsibility for its control lay with the Board and its compensation committee rather than via additional regulation,” Colleen Cunningham, President and CEO of FEI said, noting the questions on executive pay drew some of the strongest comments in recent survey history.

Seventy-one percent of respondents are generally behind the SEC’s proposal to expand disclosure of executive compensation. About one-third say the proposal will force companies to be more careful not to award excessive pay, while 4 percent believe disclosure will actually drive pay up.

Regarding H.R. 4291, which would require shareholder approval of executive pay packages, a clear majority, 64 percent, oppose it, but surprisingly, one-third approved of the bill outright or under certain circumstances. Approval was higher among private companies than public companies.

Controlling Employee Benefit Costs

The relentless pressure of rising costs for employee benefits is reflected in that more than half of respondents expressed concerns about the rising costs of premiums they have to pay to the Pension Benefit Guaranty Corporation, while 37 percent of CFOs whose companies offered defined benefit pension plans are considering changes to the plans, including converting it to a defined contribution plan or cash balance plan or even freezing it. Health benefits are also problematic with 95 percent of companies expecting their health care spending to increase, with the average increase forecast at 8 percent. Companies in the survey group are currently covering just over 70 percent of employee health care premiums, on average, with one-third having reduced their subsidy during the past three years.

Rating Agencies and Consulting Services

Of companies whose debt is rated, 62 percent are concerned about the potential conflict of interest in credit rating agencies offering consulting services and one-quarter said the agency rating their debt had encouraged their company to purchase consulting services.

The full results of the survey can be found online at

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