- Companies Respond to Oil Prices By Cutting Back on Corporate Travel,
'Greening' Businesses -
- CFOs Say McCain Best Candidate For Their Companies -
FLORHAM PARK, N.J., and NEW YORK, Aug. 8 /PRNewswire/ -- CFOs of
American companies' optimism toward the U.S. economy continued to sink to
an all-time low in the second quarter, according to a recent survey of CFOs
conducted by Financial Executives International (FEI) and Baruch College's
Zicklin School of Business.
The CFO Optimism Index for the U.S. economy was 48.92 for the quarter,
plummeting even further past last quarter (54.29), which was an all-time
low for the survey. The growth of the U.S. economy was identified to be the
principal CFO worry for the second half of 2008 (48%). Rising oil costs
(35%), consumer spending / demand (29%), and inflation (25%) were also top
concerns.
CFOs' outlook toward their own companies, however, remained relatively
stable this quarter, as the Optimism Index for CFOs' own companies declined
only 1.06 points from last quarter's all-time low to 67.06. CFOs cited top
business challenges for the remainder of the year as expense control and
competition (30% and 25% respectively), while controlling labor costs was
low on the list (1%). While availability of capital continues to receive
significant attention in the financial press, few CFOs identified this as a
top concern (10%).
"We continue to see that CFOs are increasingly anxious about the
business ramifications of the current U.S. economic downturn," said John
Elliott, Dean of the Zicklin School of Business at Baruch College.
"However, while economic worries remain, the steadiness in CFOs' outlook
toward their own companies may reveal that they are adapting to the turmoil
and taking appropriate actions within their organizations."
In the next twelve months these CFOs continue to plan increases in
technology spending by an average of four percent and other capital
spending by an average of eight percent. They expect modest hiring
increases of one percent but believe that they will be able to increase
product prices by five percent.
CFOs React to Oil Prices
Nearly half of respondents feel that the price of crude oil will
continue to skyrocket. At least half of CFOs surveyed believe that the
price of oil per barrel will be at least $160 or higher in six months, a 33
percent increase from the current $120.02 (as of 8/7/08)(1).
The survey revealed that CFOs are responding to mounting oil prices,
with the vast majority of respondents either actively engaged in, or in the
process of, changing behavior to accommodate oil prices. When those who
said they were actively engaged were asked about specific ways in which
they were changing their behavior, approximately half revealed that they
were increasing prices for the products and/or services their company sells
(53%), cutting back on corporate travel (50%) or taking steps to become
more ecologically responsible or "green" (i.e. investing in more energy
efficient products) (47%).
"This survey identifies oil prices as an issue for CFOs and they don't
anticipate cost relief," said Cheryl de Mesa Graziano, Vice President,
Research and Operations for Financial Executives Research Foundation, the
research affiliate of FEI. "CFOs right now are choosing to respond by
increasing their products' prices and cutting back on corporate travel, as
well as actively taking the required steps to become "greener" companies
through a number of ecologically responsible initiatives."
CFOs and the Presidential Election
Selection of the next President of the United States is currently a
focus countrywide, and as CFOs gear up to hit the polls, they are
evaluating which candidate's policies best align with their companies. When
asked which candidate, if elected to office, would be most beneficial to
their company overall, an overwhelming majority of CFOs selected Republican
presidential candidate John McCain (71%), while only 13 percent of
respondents chose Democratic presidential candidate Barack Obama.
Respondents were also asked to gauge the impact that each candidate's
policies would have on their companies with regards to issues such as
healthcare coverage, taxes, foreign trade/commerce, production &
manufacturing costs and energy costs. On average, less than 10 percent of
respondents felt that McCain's policies would have a negative impact on any
of these factors, while a majority of respondents felt that Obama's
policies would have negative impacts with regard to taxes (87%) and
production and manufacturing costs (60%). Collectively, CFOs appear to be
unimpressed by both candidates' healthcare policies, revealing that most do
not believe that either candidate will help control healthcare costs. While
nearly three quarters of respondents (70%) stated that Obama's polices
would have a negative impact on their companies, an even larger number of
CFOs (74%) felt that McCain would have no impact at all, and only 15
percent felt that McCain would have a positive impact.
Additional Data:
CFOs Aren't Ready to Take Advantage of IFRS
The survey also revealed that CFOs are not yet prepared to welcome
International Financial Reporting Standards (IFRS). Less that one fifth of
CFOs surveyed said that they would take advantage of filing and/or
preparing financial statements if the opportunity was available for their
company (20%), while more than half (53%) would not. However, nearly half
of the surveyed CFOs stated that it would take only two to three years for
their company to adapt to IFRS should they decide to do so.
Public Cos Comply With XBRL Requirement through Filling Service
When CFOs of public companies were asked about how they plan to comply
with the SEC's recent proposed rule requiring the inclusion of an
eXtensible Business Reporting Language (XBRL) exhibit with quarterly and
annual reports, nearly half (46%) who are affected by the requirement said
they would use an XBRL filing service to comply, and another 31 percent of
CFOs plan to implement XBRL tagging software.
About the Survey
Full survey results are available at http://www.cfosurveys.com or from Nicole
Madison at nicole.madison@fd.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed
219 corporate CFOs electronically the week of July 7. 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.
Financial Executives International has been conducting surveys gauging
the country's economic outlook from the perspective of CFOs for the past
ten 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 84
chapters, 73 of which are in the United States and 11 in Canada. For more
information about FEI, visit http://www.financialexecutives.org.
About Baruch
Baruch College is a senior college of the City University of New York.
The Zicklin School of Business at Baruch College is the largest and most
diverse AACSB accredited collegiate school of business in the nation.
Baruch has a long tradition of producing accounting and finance graduates
who become leaders as CPAs and CFOs. http://www.baruch.cuny.edu
(1) Note: Respondents were asked their predictions on future oil prices
based on the current prices when the survey was conducted (July 7- 14,
2008). During that period, NYMEX Crude oil prices ranged between
$136.04 and $145.18.
SOURCE Financial Executives International (FEI)
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Related links:
http://www.financialexecutives.org
http://www.cfosurveys.com http://www.baruch.cuny.edu
CONTACT:
Nicole Madison of FD, +1-212-850-5647
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