77% of Companies To Increase Hiring; 71% To Raise Prices
Respondents Weigh In on Executive Pay Proposals, Pension Plan Costs
FLORHAM PARK, N.J. and NEW YORK, March 23 /PRNewswire/ -- Corporate
America is showing sustained optimism for economic and company-specific
growth, according to the first quarter "CFO Outlook Survey," conducted by
Financial Executives International (FEI) and Baruch College's Zicklin School
of Business.
The survey's index of economic optimism trended upward for the second
consecutive quarter, reaching 71.06 out of 100. The index of individual
company optimism crept up another 0.73 points to 78.12, the highest it has
been in almost two years.
More than three-quarters (77%) of the 200 CFOs surveyed expect their
companies to hire more people over the next twelve months, at an average
increase of 4%. Further, survey results point to additional, but modest,
inflation. Seventy-one percent of the survey respondents say their companies
plan to increase the prices of their products; however, the expected increase
averages just 1.5%.
Three out of four CFOs also expect their companies to increase capital
expenditures, with the increase averaging 7%. This is a lower expected
increase than last quarter.
Sixty-two percent of the CFOs think the futures markets are accurately
predicting the LIBOR rate will increase by about 25 basis points over the next
twelve months, while 29% believe the rise will be higher.
"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
Seventy-one percent of respondents are generally behind the SEC's proposal
to expand disclosure of executive compensation. While 4% think the disclosure
will actually drive pay up, about one-third say the proposal will make
companies more careful not to award excessive pay.
While a clear majority-64%-are against the House Bill (H.R. 4291) that
would require shareholder approval of executive pay packages, a surprising
one-third said they approved of the bill outright or under certain
circumstances. Approval for this proposal was higher among private companies
than public companies.
Colleen Cunningham, President and CEO of FEI, noted the questions on
executive pay drew some of the strongest comments in recent survey history.
"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."
Controlling Pension Costs and Other Benefits
CFOs' answers to questions on employee benefits reflected an
acknowledgement of relentless cost pressure in this area. Of the companies
currently offering a defined benefit pension plan, 37% are considering a
change to their plans, such as freezing it or converting it to a defined
contribution or cash balance plan. More than half expressed serious concern
about the rising cost of premiums they have to pay to the Pension Benefit
Guaranty Corporation.
Additionally, health benefits are still problematic. Ninety-five percent
of companies expect their health care spending to increase, with the average
increase forecast at 8%. Companies in the survey group are currently covering
just over 70% 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% are concerned about the potential
conflict of interest in credit rating agencies offering consulting services.
One in four companies said the agency that rates their debt had encouraged
their company to purchase consulting services.
About the Survey
Full survey results will be available March 27 at
http://www.cfosurveys.com. For the full results prior to that, please contact
andrewhealy@towerspr.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed 201
corporate CFOs electronically the week of March 13. CFOs from both public and
private companies and from a broad range of industries, revenues and
geographic areas, including some off-shore companies, are represented. Survey
respondents are members of Financial Executives International.
Revenue-weighted averages are provided for projected changes in capital
spending and for projected price increases. An employee-weighted average is
provided for the projected changes in health care costs and hiring.
FEI has been conducting surveys gauging the country's economic outlook
from the perspective of CFOs for the past nine years.
About FEI
Financial Executives International (FEI) is the leading advocate for the
views of corporate financial management. Its 15,000 members hold
policy-making positions as chief financial officers, treasurers, and
controllers. FEI enhances member professional development through peer
networking, career planning services, conferences, publications, and special
reports and research. Members participate in the activities of 86 chapters,
75 of which are in the United States and 11 in Canada. For more information
about FEI, visit http://www.fei.org.
About Baruch
Baruch College, founded in 1847, is a senior college of the City
University of New York. The Zicklin School of Business at Baruch College is
the largest collegiate school of business in the nation, producing graduates
who assume leadership positions in all areas of American business as well as
conduct important academic research. Baruch has one of the largest accounting
programs in the country whose graduates become practicing CPAs.
http://www.baruch.cuny.edu
SOURCE Financial Executives International; Baruch College
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Related links:
http://www.cfosurveys.com
http://www.fei.org http://www.baruch.cuny.edu
Company News On-Call:
http://www.prnewswire.com/comp/310650.html
CONTACT:
Andrew Healy, TowersGroup, +1-212-354-5020,
andrewhealy@towerspr.com; Chris Allen, FEI, +1-973-765-1058,
callen@fei.org; Burton Rothberg, Baruch College, +1-646-251-4211,
burt@rothberg.net
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