CEO Confidence Index March 2006

Watch theApril CEO Confidence Index on CNBC’s Squawk Box   CEO Confidence Climbs in March. Corner office confident on hiring conditions, current prospects. Plus, CEOs prefer private companies, say public CEOs deserve pay premium.  

March 22 2006 by Chief Executive


Montvale, N.J.- The Chief Executive Magazine CEO Confidence Index continued it’s strong rise over the past year, increasing by 3.1 points to 175.6. The Index currently stands a mere 6.8 points below it’s highest level of 182.4 back in January of this year. January’s confidence marked the highest level seen in CEOs since 2002. One CEO surveyed remarked, “The economy is strong and will continue growth and improvement in the next few months.”

This month’s rise in confidence was fueled mainly by the Employment Confidence index, which rose by 4.5 points to 189.7. Over half of CEOs surveyed (54%) ranked current employment conditions as good. This number was the highest portion of CEOs to be so bullish on current employment conditions since 2002. Said one CEO regarding the current strength of the economy, “business is booming and we are having a hard time finding employees.”

Another strong performing index was the Current Conditions Index. It rose by 6.1 points to 215.5 according to the 193 executives surveyed, and it stands over 15 points above the nearest component index. In fact, Current Confidence has been on a tear in recent months, rising 50 points (30%) since May last year.

That stands in stark contrast to the Future Conditions Index, which has risen only 15 points (11%) in the same time period. The gap between future and current confidence stands at 66.9 points, it’s highest level ever. Executive concerns about the future include skepticism regarding federal spending and its impact on the economy. One respondent commented, in reference to the administration’s current fiscal policies, ” Bush’s policies are not working.  His fiscal policy of tax cut and spend makes me long for the more responsible leadership of President William Jefferson Clinton.”

And even though confidence remains strong, CEOs are also concerned about inflationary pressures and the housing market, though these concerns have eased a little in recent months. One CEO noted, “Other than energy prices (and related cost-based price increases), inflation has not been an issue.  The potential negative impact of a housing collapse on the overall economy, driven primarily by interest rate increases, is what I lose sleep over.”

In addition to their thoughts about the current economic climate, CEOs were also asked additional questions regarding the difference between private and public business ownership. The results were very one-sided, in favor of private companies. Even though 80% of the CEOs surveyed run private companies, even more-over 90%-would prefer to run their companies privately.  Suggesting that some publicly traded company CEOs will go private.  

CEOs’ concerns about the public business environment come from many spectrums. Some are institutional. CEOs are concerned about the obsession with quarterly profits in the public marketplace, believing they get in the way of long-term strategies that may in fact be better for the companies involved.

Other concerns are in regards to the regulatory and accounting procedures required of public companies. Executives are concerned that regulations like Sarbanes Oxley (SOX or SARBOX) are adversely affecting their companies: “SOX compliance does not benefit the customer of the company in any way. It is just a cost/tax of being public.” “With problems like those our respondents are highlighting regarding public ownership,” said CEO of Chief Executive Group Edward M. Kopko, “we are concerned that private companies will not seek capital in the public marketplace like they traditionally have. This will have long-term impacts on the growth of the U.S. economy.”

Given these additional concerns and pressures, 62% of CEOs surveyed predict that the private sector will attract the best business leaders in the long run. To deal with these extra pressures, CEOs estimate that over 50% in compensation premiums should be given to CEOs just for running companies in the public marketplace.

The CEO Confidence Index normally is released on the third Tuesday of each month.  For additional information regarding the confidence of public- and private-company CEOs, details about regional CEO attitudes on employment, investment and business conditions, as well as confidence differences between service and non-service industry CEOs

Chief Executive is a controlled circulation magazine that has been published since 1977. It reaches 42,000 chief executive officers and their peers, reaches a total readership of 170,000, and is published 8 times a year.  Chief Executive Group facilitates “Chief Executive of the Year,” a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of his or her peers.  George David, Fred Smith, Hank Greenberg, Bill Gates, John Chambers, Michael Dell and Sandy Weill are just some of the leaders who have been honored during the award’s 20-year history.  Chief Executive also organizes roundtable meetings and conferences to foster opportunities for top corporate officers to discuss key subjects and share their experiences within a community of peers. 

CEO Index, March 2006

Respondents: 193

 

Mar-06

Change from Prev Month

Ceo Index

175.6

+3.1

Current Confidence Index

215.5

+6.1

Future Confidence Index

148.6

+1.1

Business Condition Index

197.7

+3.8

Invest Confidence Index

145.6

+1.5

Employment Confidence Index

189.7

+4.5

Special Polling: Public vs. Private Ownership

Would you prefer to run your company publicly or privately?

Public

9.47%

Private

90.53%

 

Which company construct will attract the best business leaders in the long run?

Public

37.89%

Private

62.11%

 

All things being equal, what CEO compensation premium should be given to run a public company?

54.30%