Business Outlook Survey

End-of-Year Economic Outlook: The U.S. Leads the Way

At the end of 2014, the U.S. may offer the best prospects for continued economic recovery, according to the latest Duke/CFO survey.
David W. OwensDecember 10, 2014
End-of-Year Economic Outlook: The U.S. Leads the Way

End-of-year results from the quarterly Duke University/CFO Global Business Outlook survey leave us with a muddled outlook for the global economy. The confidence of U.S. finance executives in both the domestic economy and their own companies remained relatively strong. U.S. confidence levels were matched by the outlook from Asia, but Chinese companies continued to show evidence of a slowdown, while the Japanese outlook took a step backward.

USeconomyEuropean finance executives appear to have had something of a reality check following a burst of optimism in the previous quarter. And in Latin America, Peruvian confidence offset to a degree the pessimistic outlooks persisting in Brazil and Chile.

Each quarter, the Duke University Fuqua School of Business and CFO Publishing conduct a survey among finance executives around the world to gauge their views on the states of their economies and their businesses. For the fourth quarter of 2014, we collected responses from 517 CFOs and other executives at U.S. companies; 159 executives from a range of European countries; 159 from Latin America, concentrated in Brazil, Chile, and Peru; 160 from Asia, including 40 Chinese firms and 39 in Japan; and 54 from Africa (primarily South Africa).

Will the U.S. Become the Anchor for Growth?

In the fourth-quarter survey for 2014, U.S. economic optimism continued to rise, reaching a rating of 63.7 out of 100 on the heels of last quarter’s bump to 62.5. However, executives’ confidence in their own companies fell back a bit to 66.4, after marking a high for the year of 68.9 last quarter. The 12-month outlooks for growth in full-time employment and wage increases, at 2.9% and 3.4%, remain weak by historical measures, but still modestly outpace expectations for inflation (a 2.4% increase).

Continuing concerns over mandated health care coverage under the Affordable Care Act (ACA) may be a significant contributor to finance executives’ concerns, as a third of U.S. respondents cite the cost of benefits as a significant risk to their financial performance. Only concerns over government policies (45%) and regulatory requirements (38%) — which may themselves be partially attributable to ACA implementation — are ranked higher. The concerns over cost of benefits are most prevalent among companies with less than $500 million in revenues.

The economic outlook in China shows some signs of cooling down, with economic optimism dipping to 61.4 out of 100. This change is driven largely by the 60% of Chinese executives who say they are less optimistic this quarter about their country’s economy. The effect on own-company optimism is even more severe, dropping to 59.9 after reaching a 2014 high of 66.9 in the third quarter. Still, the absolute levels of confidence in China remain among the highest in the world.

However, the outlook for the Japanese economy is decidedly worse, plunging to 54.9. This represents the lowest level in 2014. Own-company optimism fell at a comparable rate, to 55.4, and the number of Japanese executives who were less optimistic about both the economy and their own companies’ prospects was at the highest level seen over the course of the entire year.

In Europe, economic optimism remains below long-run averages, perhaps reflecting worries about the ineffectiveness of governmental actions in promoting economic recovery. Capital spending may rise by an anemic rate of about 4 percent, but the employment remains grim, remaining near zero.

Latin American economic optimism remains well below the levels seen a year ago. Peru and, to a lesser extent, Mexico have stronger outlooks than some of the other countries in the region.

Gender-Blindness on the Board of Directors

This quarter, we examined corporate goals for diversity on their boards of directors, focusing in particular on the inclusion of women on boards. We found that nearly all of the companies in the survey (96%) report that they have no specific goals or guidelines for board diversity. In fact, diversity ranks only seventh among the qualities that U.S. firms are looking for in their next director, trailing a more concrete set of skills, experiences and capabilities.

It seems clear that finance executives focus more on the characteristics and qualities they feel contribute more directly to corporate growth and success, such as previous board experience, familiarity with their industry, C-level experience, and out-of-the-box thinking.

In expanding on their companies’ thinking on board diversity, respondents most often made comments such as “we select board members based on qualification – sex and race have nothing to do with qualifications,” and “minority status was not a first consideration — it would only be looked at if there were a tie in qualifications.” Overall, executives’ sentiments seemed to agree with the respondent who wrote, “We select those best suited for the role regardless of gender.”

Half of U.S. survey respondents indicated that their companies have “no particular challenges or obstacles” to adding women to their boards, and another 17% said that they didn’t know.

One-third of U.S. survey respondents did cite challenges. Among this group, the challenges cited most often were: too few available women with desired industry experience (41%), a lack of desired skill sets (14%), a lack of board experience (19%) and a lack of C-suite experience (17%). But, nearly 30% of these firms indicated that, to appoint a woman, they must first wait for a current board member to retire.

When asked to cite the specific reasons their companies had added their most recent female board member, U.S. respondents again tended to focus on specific skills and capabilities rather than on gender. Sample responses include “experience marketing in China,” “IT expertise,” “strong financial background,” “character and ethics,” “influence,” and “C-suite and industry experience.” The desire to create a board with gender diversity was mentioned infrequently.

The key takeaway from these survey findings is that finance leaders are thinking in terms of finding board members that will help their firms manage difficult economic times, generally without regard to the optics of board composition. Respondents simply said they want the best board members, and so gender and ethnicity may remain secondary considerations in the selection of new board members. However, these responses seem to beg the question as to whether current board compositions, which respondents report are 80% male, are reflective of the expanding role of women at the top levels of corporate leadership.

Full results for the Duke/CFO survey in the fourth quarter of 2014 can be viewed at

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