Global Business Outlook Survey - Second Quarter, 2013

Duke Fuqua School of Business finance Professor John Graham discusses the latest results of a global quarterly survey of chief financial officers. - http://bit.ly/181SgnA ---------------------------------------------- DURHAM, N.C. -- U.S. businesses trail their global counterparts in terms of how much importance they place on corporate social responsibility (CSR) and sustainability. Nearly half of U.S. chief financial officers rate CSR and sustainability as moderately important or very important items in their business strategies. By contrast, the rating in Europe is 63 percent, 67 percent in Asia, 76 percent in Latin America and 83 percent in Africa. Also, optimism among CFOs about the U.S. economy is now above the long-run average for only the second time since 2007. These results and other analysis of business corruption, cash hoarding and executive pay are some of the findings from the latest Duke University/CFO Magazine Global Business Outlook Survey, which concluded May 31. The survey has been conducted for 69 consecutive quarters and spans six continents, making it the world's longest running and most comprehensive research on senior finance executives. Presented results are for U.S. firms unless otherwise noted. "In the U.S., companies are split on the importance of corporate social responsibility," said survey director John Graham, a professor of finance at Duke's Fuqua School of Business. "While concern about CSR has undoubtedly increased in the U.S. during the past decade, our results indicate that these objectives have not permeated the entire corporate sector." The survey also asked CFOs why firms focus on CSR. Two-thirds of U.S. companies that consider CSR an important objective list "it's the right thing to do" as one of their top three reasons for engaging in CSR, followed by improving external image and brand (61 percent), improving employee morale and hiring (49 percent), and in response to legal or regulatory requirements (28 percent.) The survey also asked European CFOs whether and how their companies track social responsibility. About 44 percent of European CFOs say their firms track such efforts, more than half well beyond the minimum legal or regulatory requirements. Among firms that do not track CSR, the most common explanations are lack of resources, and not sensing demand from stakeholders to do so. OPTIMISM, SPENDING AND HIRING CFO optimism about the U.S. economy has rebounded this quarter. The U.S. Business Optimism Index rebounded to 61 on a scale from 0 to 100, well above last quarter's reading of 55 and also above the long-run average index value of 59. Latin American CFOs are the most optimistic in the world (66, down from 69 last quarter), followed by Asian business leaders (62). African (56) and European (53, same as last quarter) CFOs are less optimistic about the future. Despite the jump in optimism about the overall economy, U.S. companies plan only moderate increases in business spending (planned increase of 6 percent over the next 12 months, up from 5 percent last quarter) and full-time domestic employment (up 1 percent, not enough to significantly affect the unemployment rate.) "It's noteworthy that, in the U.S., CFOs' perceptions of their own companies' prospects are remaining stable, but aren't surging forward as quickly as their perceptions of the broader economy," said Celina Rogers, vice president of research at CFO Publishing. "This may be an indication that companies are being cautious about their own plans until they have more assurance that the economic improvement they expect to see will last." Japan stands out as the only major economy in which the outlook for the country's economy (63) is much higher than the own-firm outlook (55.) "This most likely reflects the very positive impression that the business community has of new Prime Minister Shinzo Abe and his aggressive monetary policy and fiscal spending," added Graham. "One concern, however, is Japanese firms expect the prices of their own products to decline this year, counter to the goal of government policy." Full-time domestic employment is expected to fall by 2 percent in Europe and increase by 0.2 percent in Asia. In contrast, employment in Latin America and Africa is expected to increase by more than 5 percent.