Nearly nine out of 10 (88%) of CFOs are more
optimistic about the US economy this quarter than last,
with a miniscule 1% reporting less optimism, up from only
74% reporting more optimism about the economy and 7% less
last quarter (See
CFOs Giddy About US Economic
). Further, more than two-thirds (69%) of the CFOs
are cheerful about their own company prospects, compared
to 67% last quarter, according to the year-end release of
the Financial Executives International (FEI) and Duke
University Fuqua School of Business CFO Outlook
Eighty-eight percent of CFOs are especially pleased
with the outlook in corporate earnings, anticipating an
increase on average of 14% over the next 12 months. This is
brought on by a continued surge in productivity; a number
the survey respondents say will be up 4% in 2004.
Much of the reason for such strong corporate earnings
projections is the expectations for increases in employment
and capital spending.
Two-thirds of the surveyed companies plan to add to
head count in 2004, while only 14% say they will reduce
Overall, the survey expects the number of employees to net
a 2% increase in the coming year.
Similarly, 63% of companies expect to increase capital
spending, with an average increase of 5%.
With higher employment figures, CFOs anticipate an
increase in wages by 3.4% in 2004.
Also on the rise, is overtime, which those polled said
would be up 1.4% next year, slightly less than last
quarter's 1.9% growth projection.
"Corporate America is beginning to loosen their purse
strings, and they're beginning to hire as well," noted John
Graham, a finance professor at Duke University and the
director of the survey. "These are key drivers to a
The overall sense of good will also shows up in higher
expectations about the gross domestic product (GDP).
Last quarter, CFOs expected the GDP to increase by 2.9%,
while this quarter GDP is expected to grow by 3.6% over the
The CFOs also identified the economic factors that would
have the most positive impact on their companies in
2004. The most popular response was corporate
investment, cited by slightly more than one-quarter of CFOs
as having the most positive impact. That was followed
by improving US employment and low interest rate
On the other side, 33% said health-care costs would have
the most negative influence on their companies in 2004.
In fact, nearly all CFOs (98%) expect a hike in health-care
costs at their company, with the average projected increase
The survey also queried CFOs about the impact of the
ongoing mutual fund scandal in their companies' retirement
Roughly a quarter (23%) has already made changes to the
investment options available to employees in their 401(k)
plans, and another 29% are considering changes. The
remaining companies (48%) do not plan to make changes at
"We're seeing some of the wide reaching ramifications of
mutual fund wrongdoing," noted Colleen Sayther, President
and CEO of FEI. "Companies have some hard decisions to make
in terms of what's a reasonable response to an allegation
about a 401(k) provider, but survey results indicate
companies are voting with their feet. Defined
contribution vendor relationships are typically very long
term. The fact that half the firms in our survey may
change their current investment vehicles represents a sea
Also on the chopping block at some firms is the use of
Thirteen percent say they will eliminate the use of stock
options, and another 60% plan to reduce stock option
compensation. The remaining 27% of companies say that they
will not change the use of options in their employee
Among the public companies that will decrease the use of
stock options, 28% will not replace the options with any
other form of compensation.
Results of this survey are available at