These are some of the conclusions of the year-end 2007 Duke University/CFO Magazine Global Business Outlook survey, which asked CFOs from a broad range of global public and private companies about their expectations for the economy. (See end of release for survey methodology.)

SUMMARY OF FINDINGS:

• Optimism reached its lowest point since the optimism index was launched six years ago. Pessimists outnumber optimists by an eight-to-one margin, with 72 percent of CFOs more pessimistic and only 9 percent more optimistic about the U.S. economy than they were last quarter. ??
• Weak consumer demand, high labor and fuel costs, and credit market turmoil are the top concerns of CFOs.
• Credit conditions have directly hurt one-third of companies, most through decreased availability of credit. ??
• At nearly one in five companies, employees have increased hardship withdrawals from their 401(k) accounts, in many cases to make mortgage payments or ward off personal bankruptcy.
• Year-end bonuses will fall by 10 percent relative to last year.
• Among firms with greater than one-fourth of sales in foreign locations, more than 60 percent have taken actions in response to the depreciated dollar by increasing hedging (expanding the range of investments to reduce risk) or changing the location of investments and outsourced employment.
• Capital spending is expected to increase only 4.1 percent, and domestic employment will increase only 0.5 percent, though outsourced employment should rise 5.6 percent.

PESSIMISM ABOUT U.S. ECONOMY

Pessimism about the U.S. economy increased, with pessimists far outnumbering optimists. The CFO optimism index for the U.S. economy, begun in June 2001, reached its lowest level ever. (See chart at end of release.)

???CFO optimism is spiraling downward, surpassing the record low for optimism set last quarter,??? said John R. Graham, director of the survey and a finance professor at Duke???s Fuqua School of Business. ???This is dramatic because CFOs have a track record of accurately predicting future economic activity, and their predictions run one or two months ahead of other common economic indicators. With pessimists greatly outnumbering optimists, we expect weak capital spending, employment and earnings in 2008.???

Own-firm optimism tied an all-time low, with pessimists outnumbering optimists for only the second time in the history of the index. ??

MAIN STREET TO THE FED: IT IS TIME FOR ACTION

???The Fed has considerable interest in measuring the potential impact of the credit crisis on the overall economy,??? said Duke international business professor Campbell R. Harvey, founding director of the survey, ???and our survey provides the first direct evidence of the credit fallout.???

The survey shows that 19 percent of AAA-rated firms, 38 percent of AA or A firms, and about half of BBB or lower-rated firms have been negatively impacted by credit conditions. ???Most disturbingly, one-third will cut capital spending plans as a result of the conditions and one-quarter indicate that hiring plans will be scaled back. These actions are detrimental to economic growth.???

???The toxic mix of plunging residential investment and weak non-residential investment is exactly the scenario that the Fed wants to avoid,??? Harvey said.

Nearly 40 percent of respondents believe a recession will begin in 2008.

???If you believe a recession is imminent, you become very conservative in both capital spending and employment plans,??? Harvey said. ???You go into defensive mode.???

The CFOs in the survey support ??? by a 2-to-1 margin ??? a cut of 25 basis points at the Dec. 11 meeting of the Federal Open Market Committee. However, a significant number of CFOs are worried about the potential negative impact on the dollar.

WEAK U.S. DOLLAR

Nearly half of companies with foreign sales constituting at least 25 percent of total sales indicate the recent depreciation of the dollar has helped their firms, particularly in terms of exports and competitive position abroad. Among multinational U.S. firms, about 80 percent say profits from foreign divisions are helping more than in previous domestic slowdowns, and 36 percent say the impact is moderate or large.??

Offsetting these benefits to some degree, the depreciated dollar has hurt nearly one-third of companies because of increased raw materials costs.

???We asked the CFOs whether they think that the dramatic depreciation of the U.S. dollar is permanent, or whether they think it is cyclical and will reverse itself,??? said Kate O'Sullivan, senior writer at CFO magazine. ???Among U.S. CFOs, two-thirds say that the dollar depreciation is cyclical and will eventually reverse. Perhaps because of this view, 70 percent of U.S. companies have taken no specific action in response to the dollar depreciation. Only 18 percent have increased hedging and less than 9 percent have changed location of investments or outsourced work.??? ??

In contrast, fewer than half of European and Asian CFOs think the U.S. dollar will eventually appreciate, and more than one-third of them have increased hedging in response.

CREDIT MARKETS, CONSUMER DEMAND, FUEL AND LABOR COSTS TOP CORPORATE CONCERNS

Concerns about weak consumer demand, fuel costs and wage inflation continue to top the list of CFO worries. CFOs are also very concerned about credit markets, with nearly one-third (32.3 percent) of companies saying they have been directly affected by recent credit market unrest.??

Among firms directly affected by the credit turmoil, 47.6 percent say they have experienced an increased cost of credit (median increase of 50 basis points) and 49 percent say credit has become less available. Nearly one-third of these same firms will reduce capital spending plans in response to the credit crunch, and one-fourth will reduce hiring plans.

MERGERS AND ACQUISITIONS AND INFLATION

Forty percent of U.S. firms plan to acquire assets in 2008. One-third of those plan to buy a company or companies, and 22 percent plan to acquire assets of another company but not the entire firm.

Companies plan to raise the prices of their products 2.8 percent in 2008, up from the 2 percent expected inflation in last quarter???s survey.

RESULTS UNIQUE TO EUROPE

European CFOs grew dramatically more pessimistic. In the past quarter, 56 percent of European CFOs have grown more pessimistic about the economies of their own countries relative to the previous quarter, and only 13 percent have grown more optimistic.??

European employment is expected to fall 0.6 percent. The cost of labor is the No. 1 corporate concern in Europe, with skilled-labor shortage No. 2, weak consumer demand No. 3 and the cost of fuel No. 4.

One-third of European companies have been directly negatively affected by credit market conditions.??

RESULTS UNIQUE TO ASIA

CFOs from 82 percent of Asian multinational firms say foreign divisions are being pressured to contribute a greater proportion of overall company revenue growth in 2008.

CFO optimism remains strong in Asia, with 62 percent of respondents more optimistic about regional economic growth than they were last quarter. Domestic employment should increase 9 percent in 2008, and capital spending a robust 11 percent on average.??

Thirty-four percent of Asian CFOs think economic growth in China is unsustainable, or on the verge of becoming unsustainable. ????

RESULTS UNIQUE TO CHINA

Sixteen percent of Chinese firms say that they are much less interested in acquiring U.S. firms because of political problems that arose after previous acquisition attempts.

Chinese optimism is down, with 38 percent of Chinese CFOs having become more pessimistic and 31 percent of respondents having become more optimistic about Chinese economic growth than they were last quarter. However, the absolute level of Chinese optimism (72 on a scale of 0 to 100) is on par with overall Asian optimism, and greater than U.S. (57) and European (62) absolute optimism.

Sixty-one percent of Chinese companies say that a U.S. recession would hurt their firms, but only 9 percent say it would hurt a great deal.

For additional comment, contact Duke???s John Graham at (919) 660-7857 or john.graham@duke.edu or CFO magazine???s Kate O???Sullivan at (617) 345-9700 (x214) or kateosullivan@cfo.com. For commentary about European results, contact Janet Kersnar at +44 0 20 7576 8100 or janetkersnar@cfoeurope.com or Tilburg???s Kees Koedijk at +31-6-55186755 or C.Koedijk@uvt.nl. For commentary about Asian results, contact Don Durfee at +852 2585 3275 or dondurfee@economist.com. For commentary about Chinese results, contact Chen Wu at +86-21-64737128 ext 24 or chenwu@economist.com

Detailed results, including tabular summaries of the numbers in this release and results from previous surveys, are available at <http://www.cfosurvey.org>.

??
About the survey: This is the 47th consecutive quarter that the Duke University/CFO Magazine Global Business Outlook survey has been conducted. The survey concluded Nov. 30 and generated responses from 1,275 CFOs, including 573 from the U.S., 191 from Europe, 203 from Asia (not including China), and 308 from China. The survey of European CFOs was conducted jointly with Tilburg University in the Netherlands. Results in this release are for U.S. companies, unless otherwise noted. Among the industries represented in the survey are retail/wholesale, mining/construction, manufacturing, transportation/energy, communications/media, technology, service/consulting and banking/finance/insurance. Revenue-weighted mean growth rates are provided for earnings, revenues, capital spending, technology spending and prices of products. Employee-weighted mean growth rates are used for health-care costs, productivity, number of employees and outsourced employment. The earnings, dividends, share repurchases and cash on balance sheet are for public companies only. Unless explicitly noted, all other numbers are for all companies, including private companies.

About CFO Publishing: CFO magazine and CFO.com are owned by CFO Publishing, an Economist Group business. With a rate base of 450,000, CFO is the leading business publication for C-level and senior financial executives. It reaches an international audience of corporate leaders with its global group of magazines, including CFO Europe, CFO Asia and CFO China. For more information, visit cfo.com.

About the Fuqua School of Business: Duke???s Fuqua School of Business was founded in 1970. Fuqua???s mission is to educate business leaders worldwide and to promote the advancement of business management through research. For more information, visit www.fuqua.duke.edu.
_?????????????? _?????????????? _?????????????? _

Optimism diffusion measures the percentage of CFOs who have increased optimism minus the percentage who have decreased optimism (through December 2007).

The site, MapEcos.org, provides a balanced view of the environmental performance of over 20,000 industrial facilities across the US.?? The map portrays government data on toxic pollution as well as data the site???s developers are collecting from the facilities themselves about the latter???s efforts to protect the environment.?? Shaped by three faculty members and built by a group of entrepreneurial students, the site uses advanced mapping tools to reveal the pattern of industrial pollution across the entire United States.??

"We wanted to move beyond finger pointing," said Harvard Business School Assistant Professor Michael Toffel.?? "We believe MapEcos is the first website that presents information about companies??? environmental performance while providing their managers with an opportunity to publicize their environmental practices and awards.?? By giving managers a voice, we can portray a more accurate picture of what actions are underway and what problems remain."

Users of MapEcos can view maps or satellite imagery with industrial facilities color-coded according to their emissions levels and marked with a green ring in cases where a representative of the facility has provided data about its environmental management activities.?? Map users can search for facilities by name, location, corporate owner, industry, and emissions level.?? The site provides detailed information about the volume and health hazard of each facility???s toxic chemical emissions.?? It also provides context for this information by providing data about emissions levels and trends for comparable facilities.?? Where managers have provided data, MapEcos may provide information about operational policies, management systems, activities, staffing, and investment.

For those users more intrigued by pictures than numbers, the site allows users to find startling images of industrial facilities across the US, such as a magnesium facility surrounded by turquoise distillation ponds and a power plant with a huge plume of black smoke (see accompanying map images).?? Dramatic images such as these can be found for any region of the US by using a tool that lists the largest polluters in each county or state.?? Clicking a facility name moves the map to a close-up view.

The friendly interface of the site was motivated in part by the research objectives of the faculty sponsors.?? "MapEcos lets us create a kind of natural experiment, where we make information more accessible and then see how people respond," commented Michael Lenox, an Associate Professor at the Fuqua School and Faculty Director of Duke University???s Corporate Sustainability Initiative. "We plan to examine which facilities, industries, and neighborhoods attract the most attention from MapEcos users. This information may help predict which facilities should develop robust mechanisms to engage their stakeholders."?? Professor Toffel explained another line of research the team hopes to pursue, "By observing how the thousands of facilities respond to our invitation to contribute information about their environmental management practices on MapEcos, we will better understand why some types of facilities choose to be more transparent than others." ??

The faculty creators of MapEcos hope it provides a model for how academic research and public service can go hand in hand.?? "The three of us have been conducting research on business and the environment for years, and we wanted to find a way to do high quality research and make a difference at the same time," commented Andrew King, an Associate Professor at the Tuck School of Business and currently a Marvin Bower Fellow at Harvard Business School.

To build the site, the faculty teamed with a group of young technical entrepreneurs, many of them Dartmouth College students: Evan Tice, Chris Hughes, Loren Sands-Ramshaw, and Jason Reeves.?? Tice (Dartmouth '09) explained, "We built upon familiar Google Maps technology and other mapping software to give the public access to both detailed information about the environmental performance of individual facilities as well as more general information about the broad sweep of industrial activity across the US".?? Hughes added, "We also wanted to allow managers to provide information about their environmental protection activities, and this necessitated creating a system for accessing and displaying data from a survey system at the Harvard Business School."

King noted that the team named the site MapEcos "to emphasize our attempt to integrate information that is relevant both to ecology and economics. In this age of polarization, we wanted to take a stand for telling both sides of the story.?? The map will keep changing as more companies add information about their environmental improvement efforts."

"We hope industrial pollution is only the beginning," commented Lenox. "Most environmental problems come from habitat change, land use change, and distributed sources of pollution.?? Mapping will be even more powerful in studying and improving those issues."

The MapEcos website can be found at www.mapecos.org, and a compendium guidebook with additional information about the site and the team is available at www.mapecos.org/about.

Image 1: Magnesium Production Facility


Image 2: Coal Fired Electrical Power Plant

???This decision is too complex to logically consider all the relevant aspects intuitively in one???s head,??? write Professor Ralph Keeney and doctoral student Dinah Vernik of Duke???s Fuqua School of Business. ???Yet, for many, it is too important and consequential to simply go with one???s feelings.???

The pair have demonstrated that using a formalized approach to this very personal decision may help a woman evaluate her options regarding the optimal time for her to attempt to conceive a first child.?? Their analysis, which was published in the current issue of the journal Decision Analysis, also reveals that women may have more options than they realize.

Keeney and Vernik developed a sophisticated logical decision model to help women weigh their options. Variables are plugged into the model which then attempts to balance the benefits of motherhood against its effects on career and social interests and the age-related concerns of diminishing fertility or an increased likelihood of conceiving a child with a genetic abnormality.??

In their analyses, Keeney and Vernik illustrate their model by considering the situations of a 25-year-old doctoral student who desires an academic career and a 20-year-old college student who plans to pursue a professional career.??

The doctoral student must assess how motherhood might affect her likelihood of achieving tenure at a university, but the authors note that this situation also applies to professional women in medicine, law and other fields where there is significant pressure to reach a particular career milestone in a defined period of time.??

If a woman feels that having a child in the early years of her career will limit her focus on work and thus significantly reduce her chances of receiving tenure, the model will indicate that the optimal age to begin to have a family is after she achieves that rank.

However, in the case of a woman who does not feel that motherhood will be a significant barrier to her pursuit of a particular milestone, the model suggests attempting to conceive a first child at a younger age. Specifically, the model can calculate for any specific situation the level of anticipated negative career impact at which an individual woman may wish to postpone having a child.

The example of a 20-year-old college student illustrates the situation when a woman claims she does not want to have a child until she reaches a certain age, say 35 years old. The model suggests that, especially in cases where both family life and career are important to the woman, having a child much earlier may be a better long-term solution than waiting until she is more established in her career.

"It may seem surprising to suggest having a child at a younger age, even if the woman places no importance on having a child until a certain age," Vernik said. "But the model takes into account the fact that taking a maternity leave has less impact on the future career of a woman who is a student or in the beginning of her professional life. This woman???s child will also be older and slightly more independent by the time the woman has reached the critical years of her career."

The researchers stress that their model should not be interpreted as prescribing solutions for women, but instead as a formalized way for helping them sort through conflicting pressures and considerations related to beginning a family.

"We use decision analysis all the time to guide complex business and policy questions and decisions, so why not use the structured approach to improve our understanding for making important personal decisions?" Keeney asked.

"A model like this doesn???t, and shouldn???t, preclude the role of emotion, input from the woman???s partner, and other factors in personal decision making," Keeney said.?? But it does allow a woman to weight different factors according to her values, and then consider those factors in relation to each other in a systematic way."

But too much optimism can be a problem: people who are extremely optimistic tend to have short planning horizons and act in ways that are generally not considered wise.

Manju Puri and David Robinson, professors of finance at Duke, report in the October 2007 issue of the Journal of Financial Economics that the differences between optimists and extreme optimists provide important insights into the interaction between psychology and economic and lifestyle choices.

Puri and Robinson developed a novel method to assess individuals??? levels of optimism, drawing on data from the Federal Reserve Board???s Survey of Consumer Finance (SCF), a triennial assessment of U.S. families??? financial and demographic information. Although the SCF does not ask about optimism directly, it does ask respondents how long they expect to live. It also collects demographics, and health-related information--the same sort of information that actuaries use to estimate life expectancy. ??

The Duke researchers combined these data to determine participants??? statistical life expectancies. Then they compared the statistical and self-reported life expectancies and categorized anyone who expected to live longer than the data predicted as an optimist.

???Most of the information we needed was already there, but we had to create a new way of combining it with other existing data in order to extract meaning about optimism,??? Puri said. ??

Puri and Robinson also labeled as ???extreme optimists??? the top 5 percent of optimists, those who think they will live an average of 20 years longer than is statistically likely.

Optimism indeed relates to a large number of behaviors, they found. In small doses optimism can lead to wise decision making, but extreme optimists ???display financial habits and behavior that are generally not considered prudent,??? the authors wrote.

Puri and Robinson find that optimists:

• Work longer hours;
• Invest in individual stocks;
• Save more money;
• Are more likely to pay their credit card balances on time;
• Believe their income will grow over the next five years;
• Plan to retire later (or not at all);
• Are more likely to remarry (if divorced).

In comparison, extreme optimists:

• Work significantly fewer hours;
• Hold a higher proportion of individual stocks in their portfolios, and are more likely to be day traders;
• Save less money;
• Are less likely to pay off their credit card balances on a regular basis;
• Are more likely to smoke.

???The differences between optimists and extreme optimists are remarkable, and suggest that over-optimism, like overconfidence, may in fact lead to behaviors that are unwise,??? said Puri. ??

The findings could lead to useful ways to consider individuals??? investment and career planning decisions, and help people understand or overcome personality characteristics that can negatively affect important financial decisions, the authors say.

???Doctors tell us that one or two glasses of red wine a day can be really healthy,??? Robinson said. ???But no one tells you to drink the whole bottle. It???s the same with optimism. A little bit is really beneficial, but too much can lead to some really bad economic choices.???

???Leadership is a skill that can be learned and developed,??? said Sim Sitkin, COLE???s Faculty Director. ???To lead with integrity and ethics requires intense commitment, reflection and understanding. The Fuqua and Coach K Leadership Conference provides an opportunity for business leaders to stay abreast of innovation and emerging trends that will expand their leadership skills beyond technical expertise.???

This year???s conference theme, ???Building World-Class Leadership Teams,??? is reflected in a wide range of panel discussions, keynote addresses, and breakout sessions. Session topics will include: building ethical teams; creating a culture of innovation; making effective execution the core competency of your team; identifying and developing entrepreneurial leadership teams; and what teaching hospitals can teach business about building world-class leaderships teams.

Duke men???s basketball coach Mike Krzyzewski, who is also the coach of the U.S. national team, will deliver a keynote on adaptability and leadership. A new session for this year will feature a dialogue between Fuqua Dean Blair Sheppard and John Allison IV, chairman and CEO of BB&T, on current and future business needs centering on leadership capabilities. ??

Other keynote speakers include Joseph Hogan, CEO, GE Healthcare; G. Kennedy Thompson, chairman, CEO and president, Wachovia Corporation; and Mellody L. Hobson, president, Aerial Capital Management, LLC.

Partner organizations supporting the 2007 Leadership Conference include: Aramark, American Express, CNN, Cushman & Wakefield, Financial Times, Heidrick & Struggles, CNN, and Mass Mutual Financial Group.

For complete details on the conference, as well as registration information, visit http://www.fuqua.duke.edu/conference/ or contact Tejumade Ajasa at tajasa@duke.edu or 919-660-7792.

The Fuqua/Coach K Center of Leadership & Ethics (COLE) was established by The Fuqua School of Business, in collaboration with the Kenan Institute for Ethics at Duke and the Duke Athletics Department, to advance leadership and ethics through research and education.??

The mission of The Fuqua School of Business is to provide the highest quality education for business and academic leaders, and promote the advancement of the understanding and practice of management through research.

The initiative pools the resources and expertise of The Fuqua School of Business, the Nicholas School of the Environment and Earth Sciences, and the Nicholas Institute for Environmental Policy Solutions.

CSI was established to develop greater understanding, through rigorous academic research, of the opportunities and limits of policies and strategies to create sustainable businesses. Among other things, the initiative???s research will examine:

• Policies and strategies to encourage innovation in sustainable technologies and production;
• The impact of nongovernmental stakeholders on corporate behavior;
• The role of information disclosure in leveraging the public sector; and
• The effectiveness of trade association-sponsored self-regulatory initiatives.

Michael Lenox, associate professor of business at Fuqua, will serve as the initiative???s faculty director. A leading expert on business strategy related to environmental issues, Lenox holds a secondary appointment as associate professor of environmental policy at the Nicholas School.

Bill Chameides, dean of the Nicholas School, and Tim Profeta, director of the Nicholas Institute and senior associate dean of the Nicholas School, will help Lenox lead the initiative.

They have begun a national search for an initiative director. The new director will sit in the Nicholas Institute and work with the initiative???s faculty directors to leverage Duke???s expertise to explore novel business strategies and public policies.

Faculty members from the Nicholas School, Fuqua and other research units across Duke???s campus will provide scholarly expertise on CSI projects. For example, Michael Lenox and Lori Bennear, assistant professor of environmental economics and policy at the Nicholas School, have already begun work on an Environmental Protection Agency Star Grant-funded project examining private and public environmental disclosure programs.??

To learn more about CSI, go to http://www.nicholas.duke.edu/institute/csi/. ]]> http://www.fuqua.duke.edu/news/sustainability-launch-0907.html Mon, 17 Sep 2007 08:00:00 EST http://feedroom.businessweek.com/?fr_story=61341de0567335063eef09fb70fb932bd06a4b05&rf=rss Fuqua In the News As Fuqua???s new dean, Blair Sheppard plans to chart a new course for the school that calls for producing "leaders of conscience" that are willing and able to tackle large global issues. http://feedroom.businessweek.com/?fr_story=61341de0567335063eef09fb70fb932bd06a4b05&rf=rss Tue, 11 Sep 2007 08:00:00 EST http://www.fuqua.duke.edu/news/cfosurvey-0907.html Press Release Optimism about the U.S. economy dipped this quarter among chief financial officers. CFOs expect slow growth in earnings, capital spending and hiring, and are very concerned about rising labor costs and weak consumer demand. The executives also expect merger activity to stay strong for the next 12 months, but to eventually slow due to private equity pushing up the prices of acquisition targets. Optimism about the U.S. economy plunged to a record low this quarter among chief financial officers. CFOs expect slow growth in earnings, capital spending and acquisitions and no growth in hiring. They are very concerned about weak consumer demand, rising labor costs and credit markets.

These are some of the conclusions of the September 2007 Duke University/CFO Magazine Business Outlook survey, which asked CFOs from a broad range of global public and private companies about their expectations for the economy. The survey, concluded Sept. 7, generated responses from 1,316 CFOs, including 580 from the U.S., 181 from Europe, 175 from Asia (not including China), and 380 from China. The survey of European CFOs was conducted jointly with RSM Erasmus University in the Netherlands. Results in this release are for U.S. companies, unless otherwise noted.

SUMMARY OF SURVEY FINDINGS:

• Optimism reached its lowest point since the optimism index launched six years ago. Pessimists outnumber optimists by roughly a four-to-one margin, with 61.7 percent of CFOs more pessimistic and only 13.6 percent more optimistic about the U.S. economy than they were last quarter.
• Capital spending is expected to increase only 3.2 percent, and domestic employment will be flat, though outsourced employment should rise 5.9 percent.
• Weak consumer demand, high labor costs and credit market turmoil rank among the top concerns of CFOs.
• The mergers and acquisitions boom will wither due to tighter and more expensive credit and weaker economic growth; there will be a shift away from private equity buyers toward corporate acquirers.
• Companies are shrugging off Chinese product safety concerns and International Financial Reporting Standards (IFRS) accounting standards.

PESSIMISM ABOUT U.S. ECONOMY

Pessimism about the U.S. economy increased dramatically, with pessimists far outnumbering optimists. The CFO optimism index for the U.S. economy, begun in June 2001, reached its lowest level ever. (See chart at end of release).

???The optimism index reached a record low, far lower than we have observed previously,??? said John R. Graham, director of the survey and a finance professor at Duke???s Fuqua School of Business. ???With pessimists greatly outnumbering optimists, the prospects for the U.S. economy are very poor, with a recession a distinct possibility. The CFO optimism index has a track record of accurately predicting future capital spending, employment and earnings.???

CFOs??? optimism about their own companies also fell. This quarter, 39.5 percent of CFOs report they are more optimistic about their own company???s financial outlook (down from 49 percent in March), while 30 percent of CFOs are more pessimistic about their own firms??? financial prospects.

WEAK CONSUMER DEMAND, LABOR COSTS, CREDIT MARKETS TOP CORPORATE CONCERNS

Wage inflation and concerns about weak consumer demand continue to top the list of CFO worries. Wage inflation is the No. 1 concern among U.S. businesses, followed closely by concern about the effects a slowing economy will have on corporate profitability.??

CFOs are also very concerned about credit markets. More than a quarter (26.9 percent) of companies say they have been directly affected by recent credit market unrest. Among those affected, 57.8 percent say they have experienced an increased cost of credit (with the average increase being 72 basis points) and 33.1 percent say credit has become less available.

FED POLICY

The survey links potential Fed actions at the Sept. 18 Federal Open Market Committee meeting to corporate borrowing. ???Cutting the Fed Funds rate by 50bp is not a panacea to the corporate borrowing problems,??? said Duke professor Campbell R. Harvey, founding director of the survey. ???Forty-five percent of CFOs say that a 50 bps drop will not help their ability to borrow, and another 37 percent say that it would only help a little.???

MERGER-AND-ACQUISITION ACTIVITY

Nearly three-fourths of CFOs expect that M&A activity will slow in 2007, with half of firms acknowledging that the slowdown has already begun. Just last quarter, the majority of CFOs expected M&A to stay strong through the remainder of 2007.

???Credit market turmoil is driving the M&A slowdown,??? said Kate O'Sullivan, staff writer at CFO magazine. ???A full 86 percent of corporations tell us that tight credit markets will slow M&A, with 63 percent saying that the increased cost in particular will dampen M&A. Another 34 percent of the respondents say that slowing economic growth, itself likely brought on by tight credit markets, will slow merger and acquisition activity. We also expect to observe a shift away from private equity buyers towards corporate acquirers.???

CHINESE PRODUCT SAFETY, INTERNATIONAL ACCOUNTING STANDARDS, PRESIDENTIAL CHOICE

US companies are shrugging off recent concern about Chinese products, with 92 percent saying they are not reevaluating their supply chain in response.

Only 14 percent of US CFOs say they are very familiar with International Financial Reporting Standards (IFRS), and fewer than 10 percent say they are very likely to file under IFRS if given the choice.

Twenty-seven percent of CFOs say they would vote for Rudy Giuliani for president, 17 percent for Mitt Romney and 13 percent for Hillary Clinton.

RESULTS UNIQUE TO EUROPE

European optimism sank this quarter. Thirty-seven percent of European CFOs have grown more pessimistic about the economies of their own countries relative to last quarter, and only 26 percent have grown more optimistic.??

European employment is expected to remain flat and capital spending should increase by about 7 percent. The cost of labor is the No. 1 corporate concern in Europe, with skilled-labor shortage No. 2 and weak consumer demand No. 3.??

Nearly 43 percent of European CFOs are concerned about credit market conditions.??

RESULTS UNIQUE TO ASIA

CFO optimism remains strong in Asia, with 59 percent of respondents more optimistic about regional economic growth than they were last quarter. Hiring plans have slowed somewhat (4.4 percent) for the next 12 months, and capital spending is expected to increase a robust 12 percent on average.??

Two-thirds of CFOs in Asia say that rising labor costs are eroding their profit margins, and 57 percent say this is causing them to look at new ways to retain staff. One-in-ten Asian firms say that high wage inflation will lead to lower quality of the products they produce.??

RESULTS UNIQUE TO CHINA

Chinese CFOs are optimistic, with 41 percent of respondents more optimistic about economic growth than they were last quarter. Employment growth should be strong (10.6 percent) over the next 12 months, and capital spending is expected to increase at a rapid 14.6 percent clip.??

Chinese CFOs are most concerned about the increasing labor costs, regulatory changes, currency values and consumer demand.??

Detailed results, including tabular summaries of the numbers in this release and results from previous surveys, are available at <http://www.cfosurvey.org>.

About the survey: This is the 46th consecutive quarter that the Duke University/CFO Magazine Business Outlook survey has been conducted. Among the industries represented in the survey are retail/wholesale, mining/construction, manufacturing, transportation/energy, communications/media, technology, service/consulting and banking/finance/insurance. Revenue-weighted mean growth rates are provided for earnings, revenues, capital spending, technology spending and prices of products. Employee-weighted mean growth rates are used for health-care costs, productivity, number of employees and outsourced employment. The earnings, dividends, share repurchases and cash on balance sheet are for public companies only. Unless explicitly noted, all other numbers are for all companies, including private companies.

About CFO Publishing: CFO magazine and CFO.com are owned by CFO Publishing, an Economist Group business. With a rate base of 450,000, CFO is the leading business publication for C-level and senior financial executives. It reaches an international audience of corporate leaders with its global group of magazines, including CFO Europe, CFO Asia and CFO China. For more information, visit <cfo.com>.

Duke???s Fuqua School of Business was founded in 1970. Fuqua???s mission is to educate business leaders worldwide and to promote the advancement of business management through research. For more information, visit <www.fuqua.duke.edu>.
_?????????????? _?????????????? _?????????????? _

Optimism diffusion measures the percentage of CFOs who have increased optimism minus the percentage who have decreased optimism.