CFO Survey

CFOs See Sweeping Business Cuts to Continue Into 2009

  • Nearly 40% of Respondents Expect Further Layoffs in the New Year

  • More Than 1/3 Have Plans to Reduce Bonuses Firm-wide

FLORHAM PARK, N.J. and NEW YORK — As CFOs of American companies reflect on the past year and look toward 2009, they reveal their confidence in the nation’s economy and their own businesses is alarmingly low, and also acknowledge the increased responsibility and pressures associated with their role as CFO. As a result, significant cutbacks have been, and will continue to be, necessary across the board, according to the most recent survey of CFOs conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business.

In the 2008 fourth quarter "CFO Outlook Survey," the CFO Optimism Index for the U.S. economy sunk to a low of 39.85 – a 46% drop from what it was in 2004 (73.55). Similarly, CFOs’ outlook toward their own companies continues its steady decline with the Optimism Index for CFOs’ own companies dropping more than 3.5 points to 58.07, an all-time low for the survey.

"Over the past few years, we have observed a steady decline in CFO optimism, and with new all-time lows this quarter, it has become clear that things are getting worse before they get better," said John Elliott, Dean of the Zicklin School of Business at Baruch College. "These findings are reflective of the broader sentiment we are seeing - from dismal unemployment numbers to a rise in corporate restructurings - and demonstrate the magnitude of uncertainly clouding the financial community as we head into 2009."

Amidst this challenging environment, CFOs overwhelmingly perceive an increase in the breadth of responsibility and pressure placed on them as CFO by both their employees and shareholders. When asked to compare with this time last year, 88 percent state it is now higher.

Cutbacks Now, and What’s Ahead for 2009

CFOs reported that, for cutbacks implemented in 2008, hiring, capital spending, layoffs and marketing/advertising topped the list, with the same areas most frequently identified for cutbacks in 2009. Ninety-two percent of CFOs intend to implement some form of cutbacks in 2009, compared with only 66 percent in Q1 of this year. Nearly 40 percent plan to conduct layoffs in 2009 (versus 24 percent in Q1 of this year), while nearly 80 percent plan a hiring decrease or freeze in the New Year. Moreover, in every single category, cutbacks planned for 2009 increased from already-high 2008 cuts.

A large majority of CFOs (80%) have cut discretionary spending at their companies for the fourth quarter:

• Areas hit hardest by these cuts were: holiday events (cut by an average of 32%); overtime (cut by an average of 22%); and entertainment (cut by an average of 18%).
• While training and education for staff, corporate sponsorships, employee perks and travel were all slated to receive percentage reductions in the double-digits, executive travel was least affected, with an average cut of 11%.

Year-end bonuses were also identified as a major target for companies’ cutbacks:
• More than a third (38%) have specific plans to reduce or eliminate year-end bonuses for employees across the board.
• 44 percent intend to reduce or eliminate year-end bonuses at the C-suite level or above.

Philanthropy did not prove immune to cuts either:
• 50 percent of those CFOs whose companies have historically given declared that their charitable contributions have decreased during 2008.
• 33 percent of that same group reported that their giving strategies have shifted to be more aligned with achieving business goals.

 

EXPECTED CUTBACKS
Q4 2008 (implemented during 2008
Planned for 2009
Hiring 65% 68%
We are not planning any at this time 9% 8%
Layoffs 37% 39%
IT/technology 25% 33%
Benefits 21% 27%
Executive perks 20% 26%
Marketing/advertising 28% 34%
Capital spending 47% 58%
Debt levels and interest costs 19% 25%
Business acquisitions 13% 17%
Research and development 12% 15%
Dividend reductions or eliminations 5% 7%


Biggest Worries and Challenges for 2009?

“Mirroring the results of our Q4 2007 survey, American CFOs have again let it be known that U.S. economic growth and consumer spending are, by far, their top economic concerns for the coming year,” said Cheryl de Mesa Graziano, Vice President, Research and Operations for Financial Executives Research Foundation, the research affiliate of FEI. “There is also a clear and significant anxiety over credit availability. In fact, among those respondents who selected ‘other’ for key economic worries and business challenges, the most frequent write-in response was a variation on credit availability.”

Key findings include:
• Nearly 40% say U.S. economic growth is #1 economic worry for 2009.
• However, in Q4 of this year, 9% fewer CFOs cited U.S. economic growth as their #1 worry than did in Q2 of this year.
• 32% choose consumer spending/demand as top economic worry for 2009.
• Oil costs, a #1 worry for 35% of CFOs in Q2 2008, are now a #1 worry for only 2% of CFOs.
• 34% reveal expense control will be their company’s top challenge for the first half of 2009, compared with 30% in Q2 2008.
• While 25% in Q2 2008 named competition as their top business challenge, that number dropped to 21% for Q4 2008.

Overview of the Survey:

Additional topics CFOs were surveyed on included: the impact of recent accounting regulations, such as FAS 157 and FAS 159, on their companies’ EPS; man hours required to meet fair value regulatory requirements; perceived changes in debt terms and conditions. Full survey results, and historical data comparisons, are available at 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 345 corporate CFOs electronically from December 2 through December 8. 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 more than eleven years.

About the Survey

Full survey results are available at 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 www.financialexecutives.org.

About Baruch College

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. Visit www.baruch.cuny.edu to find out more.

MEDIA CONTACT: Nicole Madison of FD +1-212-850-5647