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CFO Survey


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, 2006 — 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  For the full results prior to that, please contact

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

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.



Andrew Healy
Chris Allen

Burton Rothberg
Baruch College
Zicklin School of Business