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CFO Survey


Most CFOs Support Privatization of Social Security

FLORHAM PARK, N.J., and NEW YORK, December 14, 2004 — CFOs expect accelerated growth in capital and technology spending at their companies during the next 12 months, despite acknowledging the impact of higher producer prices. 

According to the December “CFO Outlook Survey,” conducted by Financial Executives International and Baruch College’s Zicklin School of Business, participating CFOs expect capital spending at their company to increase by 14% in the next 12 months, compared to the 8% increase predicted last quarter.  They also forecast a 12% rise in technology spending versus 7% projected last quarter.

These spending projections were made despite more than half (56%) saying their companies have felt the impact of rising producer prices last quarter.  However, more than three-quarters (77%) of that group plan to pass along at least half or all of the increased costs to consumers.

CFOs remain quite optimistic about the economy.  While the “CFO Outlook Survey” optimism index took a slight dip for the second consecutive quarter, at 70.78 (out of 100) it’s close to its record high of 73.55 recorded in June of this year.

“Higher forecasts for capital and technology spending is a good sign for the economy,” said Burton Rothberg, Assistant Professor of Accounting at Baruch College.  “Even though CFOs are beginning to feel the pinch of higher producer prices, they seem confident that economic growth will prevail.”

Regarding interest rates, futures markets have been assuming the Libor rate will rise to 3.36% in the next 12 months.  About one in three CFOs said the futures markets are underestimating the rise.  Just over half of the respondents think this rise is “just about right.”  This is the first time since the interest rate question was first asked two quarters ago that such a significant number of CFOs are expecting a greater increase than the markets are.

“CFOs in our survey have shown a high collective wisdom about interest rates,” said Mr. Rothberg.  “In the last two quarters, they have correctly predicted that futures markets were overestimating future increases in interest rates.  It will be interesting to see if they again accurately forecast the eventual change in rates.”

View on Administration’s Priorities

This quarter’s survey took the CFOs’ pulse on two of President Bush’s stated priorities for the next term:  the privatization of Social Security and tort reform.  The majority of respondents (60%) support privatization of a portion of Social Security, with 80% of this group saying they believe privatization gives employees more control over their financial future.  Slightly more than half believe that the Social Security Trust will not have adequate funds to provide for future generations. 

Among those who do not support privatization, the most common reason was that the government would ultimately have to compensate for poor investment choices. Ranking second was the opinion that the average employee is not qualified to make successful long-term investment decisions.  (Respondents were able to indicate more than one reason for agreeing or disagreeing.)

“CFOs see the clock ticking on Social Security,” said Colleen Cunningham, President and CEO of FEI, “and their views reflect both the complexity of the issue and the diverse views held by Americans.  Their informed perspective will be constructive as the national debate on this issue continues.”

CFOs were about equally divided as to whether moving class action suits to federal from state courts would be beneficial to their companies.  More than one out of five companies said they been the target of a class action suit, and nearly three-quarters of these suits were filed in state courts.  Interestingly, more than two-thirds of these suits were settled out of court, and 22% of them were dismissed. 

Repatriated Earnings

The American Jobs Creation Act allows companies to repatriate earnings from overseas subsidiaries at a reduced tax rate through the end of 2005.  About one out of five companies in the survey were taking advantage of this provision or studying the matter. 

Health Care Costs Projected to Rise

CFOs’ 12-month outlook for health care costs jumped to a 10% increase, up from 9% in last quarter’s survey.  To help employees and employers cope, 29% of companies are offering Health Savings Accounts which allow workers to contribute tax-deferred money to a medical-cost-only savings account, and another 39% of the responding companies are considering it.  “These vehicles provide a valuable benefit at a low cost to employers,” Ms. Cunningham said.  “If health care costs continue to rise as predicted, more companies are likely to take advantage of these programs.”

Changes Afoot From Sarbanes-Oxley Section 404

When asked about permanent changes results from Sarbanes-Oxley Section 404 relating to the testing and reporting of internal audit controls, CFOs noted several positives.  Thirty percent cited better control over documentation of systems changes, while 21% said they had invested in a technology solution to monitor compliance and maintain and store internal control documentation.  (Respondents could choose more than one response.)  However, more than half (57%) said they had made “no substantive changes.”

About the Survey

For full survey results, visit

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College’s Zicklin School of Business, interviewed 185 corporate CFOs electronically in December.  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 capital and technology spending.  Employee-weighted averages are used for health care costs.

FEI has been conducting surveys gauging the country’s economic outlook from the perspective of corporate CFOs for the past eight years. 

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

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