Contact: Jim Gray, Duke-Fuqua, (919) 660-2935 or Chris Allen, FEI, (973) 898-4658

CFO SURVEY: Economic slowdown ahead, but a soft landing: earnings to increase 10% in 2001


Three-fourths of companies to host holiday party, costing $75 per employee;

Nearly half to adjust stock option compensation in response to declining market


DURHAM, N.C., December 18 — In a new poll of 261 companies, CFOs predict that Gross Domestic Product will increase by 2.5% in 2001, a sharp reduction compared to annualized growth of 4.3% so far in 2000 and 4.2% in 1999. The executives also expect that the S&P 500 will gain 8% over the next 12 months. These numbers are from the latest Financial Executives International/Duke University Corporate Outlook Survey, completed on December 12, 2000.

"The CFOs clearly do not expect the economy to slide into recession," says John Graham, a finance professor at Duke University's Fuqua School of Business and the director of the survey. "However, they expect growth to slow enough that they will generally operate their companies conservatively in 2001." More details are provided below on the corporate reaction to the slowing economy.

Holiday parties

Three-fourths of the CFOs indicate that their firm will host a holiday party this year, spending an average of $75 per employee. One in ten firms will spend at least $175 per employee on the festivities. The high-tech and transportation/energy industries will host the most lavish parties, spending $120 per employee.

Stock option repricing

Due to the recent stock market decline, 43% of public companies that issue stock options to executives will compensate the executives for the stock price reduction. Nearly 40% of firms will issue additional options to compensate for the reduced value of existing stock options. Three percent will increase cash compensation, and another 2% will reprice existing options. Another 4% will issue new shares or options based on book equity in exchange for outstanding stock options. (Survey respondents could choose more than one response to this question.)

Businesses will operate cautiously in 2001 in response to economic slowdown

Plans for 2001 include a moderate reaction to the anticipation of slower growth. "This reaction generally takes the form of reducing or holding certain spending categories constant, even though sales revenue is expected to increase for most firms," notes John Graham. "This has the effect of reducing spending on these categories per dollar of sales, indicating a conservative reaction to a slowing economy."

Inflation, wages, and health care costs

Earnings and Revenue

CFOs remain fairly optimistic about the bottom line for their firms. Eighty percent of the companies expect earnings to increase during 2001, with 10% growth in earnings for the typical firm. Eighty-six percent expect sales revenue to increase, with an increase of 10% for the typical firm.


In the face of a slowing economy, rising wages and health care costs, and modest increases in product prices, productivity continues to save the day for Corporate America. Nine in ten firms expect productivity to increase in 2001, with the average increase expected to be 4.4%.

About the Survey

The survey is conducted quarterly by FEI and Duke University’s Fuqua School of Business. Each survey polls a cross-section of CFOs from more than 5,000 U.S. companies. The current survey was completed on December 12, 2000. Complete survey results are available on the Internet at

About FEI and Fuqua

Financial Executives International is the leading advocate for the views of corporate financial management. FEI's 15,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies throughout the U.S. and Canada. For more information, visit

The Fuqua School of Business at Duke University was founded in 1970. Fuqua’s mission is to educate thoughtful business leaders worldwide and to promote the advancement of business management through research. For more information, visit