CEOs Plan For Increase In Capex As Talks Of Tax Cuts Intensify

Senate Finance Committee chairman Orrin Hatch (2nd R) (R-UT) and ranking member Sen. Ron Wyden (2nd L) (D-OR) listen to testimony during a markup by the committee of the Republican tax reform proposal. (Photo by Win McNamee/Getty Images)

A survey conducted by Chief Executive during the first week of November shows America’s CEOs aren’t fully convinced the proposed GOP plan for the repatriation of foreign profits will succeed in its stated goal to help stimulate the U.S. economy—ranking that likelihood at 6.71 out of 10.

CEOs within the financial services sector were the most optimistic, with 56% trusting there is a high likelihood (8 to 10 out of 10) that a clean state repatriation bill would indeed stimulate U.S. economy. When asked how they believe companies in their sector would use those funds, capital expenditures (44%) and acquisitions (39%) topped the list.

On average, more than half of CEOs (56%), irrespective of sectors, agree that the bulk of the country’s repatriated profits would most likely be allocated toward capex, followed by debt buyback (43%), acquisitions (39%) and human capital/job creation (36%).

An increase in wages appears unlikely to be on their radar (10%), but neither is executive compensation (12%), according to the survey. In fact, the sector that reported the highest chance of increasing wages is financial services, with 17% of their CEOs foreseeing using their repatriated monies to that effect.

When analyzed by company size, in terms of annual revenues, capital expenditures continue to make the list of the most probable investments, except for small companies, which say their priorities would be aimed toward creating jobs and upgrading their technology.

What to do with repatriated funds may, however, not be on CEOs’ list of priorities yet, as our survey showed a lack of confidence in Congress’s ability to make due on their pledge to overhaul the tax code. When asked to rate the likelihood of a corporate tax cut to materialize, the response verged on cautionary optimism at 6.7 out of 10.

CEOs of financial services companies were once again the most optimistic of the group, with a 7.56 average and nearly half (45%) of them believing a cut is very likely to occur. On the opposite side, wholesale/distribution CEOs were the least confident, with more than a third of respondents from this industry feeling a cut is unlikely.

On a size basis, large middle-market companies led the pack, with a 7.09 rating, while small companies trailed with 6.02.

About the survey
The survey was conducted as part of Chief Executive’s November CEO Confidence Index, America’s largest monthly survey of chief executives. The findings were based on a total of 199 responses.

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Melanie C. Nolen

Melanie is research editor for Corporate Board Member and Chief Executive. She has more than ten years of experience writing for the corporate and financial industry across Canada and the United States. She is based in Nashville, Tennessee.

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