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CEO Confidence Index November 2004

New York State Attorney General Eliot Spitzer’s latest attacks are source of concern

Chief Executive‘s CEO Confidence Index rose 1.9 points, lifting the leading economic indicator to 162.3. The index has been hovering at about that level since a 10 point drop in September 2004. Business and employment conditions remain optimistic as well. This month’s polling was done before the presidential election was decided.

The Business Condition Confidence, Current Confidence and Employment Confidence all rose strongly this month, with all indicators each jumping over twice as much as the overall index (5.0, 4.1, and 3.9 points respectively). 51% of CEO’s expect capital spending to increase in the next fiscal quarter, while only 7.7% expect capital spending to decrease. Additionally, 54.3% of CEO’s are expecting to increase employment in the next three months, while only 8.6% expect to decrease their employment.  These responses helped explain why recent job reports have been so strong.

But the current U.S. economic regulatory environment is clearly acting as a restraint on CEO confidence. Additional polling conducted by Chief Executive this month revealed that almost 79.5% of CEO’s feel the current legal and regulatory environment in the U.S. is hurting American competitiveness, while only 3.9% of CEO’s felt the environment was helping.

The Sarbanes-Oxley Act continues to be a source of irritation as are a wave of class action lawsuits and mounting health care costs. But the way that New York State Attorney General Eliot Spitzer has attacked Marsh & McLennan and the insurance industry, following similar actions against the mutual fund industry, are also a cause of concern. “The practice of settling the investigations for cash with no formal charges, no admission of guilt and no meaningful restitution to the alleged victims makes Spitzer part of the corruption rather than a solution,” said one CEO, who asked that his identity be protected.

The regulatory climate appears to have deteriorated to the point that some CEOs wonder whether they should locate headquarters or invest in the state of New York. “The CEOs we talk to, both directly and through out polling, are saying that they would have to be crazy to invest more money in the state of New York when an attorney general is on the rampage against businesses,” said Edward M. Kopko, publisher and CEO of the Chief Executive Group. “That’s particularly unfortunate because we keep hearing how the state is hungry for new jobs.”

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 reaches 42,000 chief executive officers and their peers.  It is published 10 times a year and reaches a total readership of 170,000.  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.  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 17-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.

What has been the effect of the current legal and regulatory environment in the United States?

 Hurting American competitiveness

 79.5%

264

 No effect

 16.6%

 55

 Helping American competitiveness

 3.9%

 13

 

 

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