Tech and Tax Reform: What CFOs Think

A Duke survey of chief financial officers reveals that few are prepared for the disruption of blockchain.

Tech and Tax Reform What CFOs Think

U.S. chief financial officers shared their opinions on widely divergent issues—including blockchain technology and the effects of the recent tax cut—in a recent survey conducted by Duke University in Durham, North Carolina. The survey, which also solicits opinions from CFOs worldwide, ended March 2.

Blockchain: So far, American CFOs don’t seem to find it urgent to understand the new technology. Seventy-eight percent of U.S. CFOs either don’t expect to be affected or aren’t sure how they will be affected by blockchain. Seventeen percent say their firms will be affected, but they haven’t yet adapted their business model in response. Another 4 percent say they are working to adopt blockchain, and just 1 percent say they have already adopted the technology. Only 3 percent of CFOs say they understand blockchain.

American CFOs have a better self-reported track record with other types of tech: Most say they have at least a good understanding of big data (53 percent), advanced analytics (52 percent), and artificial intelligence (48 percent).

By contrast, European CEOs seem more prepared for digital disruptions. Nearly 20 percent of European CFOs who also responded to the survey say they understand blockchain technology well, and 37 percent say they are working on or are already conducting big data analysis.

Tax reform: Sixty-six percent of U.S. CFOs say corporate tax reform is helping their companies, with 36 percent saying the overall benefit is medium or large. Forty-four percent of U.S. companies plan to increase wages more than they would have without tax reform. Thirty-eight percent plan to increase employment, and 36 percent will increase domestic investment. Thirty-one percent will increase cash holdings. Among companies with defined benefit pensions, 29 percent will increase pension contributions.

Due to tax reform, the average tax rate for U.S. companies is expected to fall by about 5 percent, from 24 percent to 18.8 percent. This could make the U.S. a more attractive place for foreign companies to invest, according to about half of the CFOs surveyed in Canada, Latin America, and Asia.

Other topics: CFOs are worried about the tight labor market, with 45 percent saying their top concern is hiring and retaining qualified employees. That tight market puts upward pressure on wages, and U.S. companies expect to see median wage growth of about 3 percent over the next 12 months. Growth is likely to be strongest in the areas of technology, energy, and consulting.

Other issues draw more attention outside of the U.S. For instance, in emerging economies, corruption damages economic growth. Eighty-two percent of Latin American CFOs say that business corruption is a significant or very significant problem, as do 75 percent of CFOs in Africa and 49 percent in Asia. CFOs believe that business corruption limits competition, hinders expansion, increases prices and reduces quality.

Despite these concerns, the report finds that optimism is up around the world, as CFOs anticipate strong global economic conditions. In the U.S., the optimism level is at an all-time high—71 on a 100-point scale—largely due to the recent corporate tax changes.

According to John Graham, a finance professor at Fuqua and director of the survey, “Our analysis of past results shows the CFO Optimism Index is an accurate predictor of future economic growth and hiring, therefore 2018 looks to be a very promising year.”

For full results, visit cfosurvey.org.