The White House is seen in Washington, DC, January 7, 2020. (Photo by SAUL LOEB / AFP)
Finance chiefs across North America are increasingly concerned about the possible outcome of the coming U.S. presidential election, which seems certain to field candidates representing widely different platforms.
According to the latest quarterly survey on CFO sentiment by Deloitte, released today, the percentage of finance chiefs pointing to the election as a concern has doubled since the prior quarter. “The upcoming U.S. elections add another source of uncertainty around policies that will shape U.S. and global economic growth going forward,” says Sandy Cockrell, head of the CFO program at Deloitte and an author of the study. Deloitte is one of the so-called Big Four accounting firms that includes competitors KPMG, Ernst & Young and PricewaterhouseCoopers.
“Nearly two-thirds say economic performance beyond 2020 will depend substantially on the outcome of the elections,” Cockrell says
For CFOs, the election is not about politics but about legislative clarity, according to Cockrell. The muddier the direction of Washington, the less ability a CFO has to map a course for a company. “Change is disruptive for everybody,” Cockrell says. “Change makes it more difficult.”
The survey, which took place in late November, tracked the responses of 147 CFOs from the U.S., Canada and Mexico, mostly at public companies with revenue over $1 billion. The percentage of CFOs who cited the presidential election as a concern jumped to 8% in the fourth-quarter report, up from 4% in the third-quarter survey. Though the survey involved only a small number of respondents, the jump is significant because responses came from the free-form comments of CFOs and not a menu of set answers, according to Deloitte officials.
The last quarterly surveys of the nonprofit American Institute of Certified Public Accountants, another closely watched measure of sentiment among financial executives, echoed Deloitte’s findings. After briefly dropping out of the top ten concerns, “domestic political leadership” has been viewed as a leading challenge facing organizations in each quarter of the last year.
“CFOs hate unpredictability more than anything,” said Jack McCullough, president of the CFO Leadership Council, a professional organization for finance chiefs, and a Forbes contributor. “Right now, they have never had less control.”
In a more predictable election, a presidential incumbent would face off with an easily identifiable challenger. This year, U.S. President Donald Trump faces an impeachment trial. And the Democratic field, though recently thinned, remains competitive, with former Vice President Joe Biden, Sen. Elizabeth Warren of Massachusetts, Sen. Bernie Sanders of Vermont and former South Bend, Ind., Mayor Pete Buttigieg, jostling for the lead.
“The contrast is pretty wide on economic policy” among the various candidates and president, McCullough says. “Let’s say Trump was removed from office. You could be looking at three different presidents this year.”
Although concern over the presidential election is rising fast, according to the Deloitte survey, it wasn’t the top issue: CFOs were actually more wary of trade policy, the possibility of an economic slowdown and geopolitical risks.
Beyond the presidential election and the ebb and flow of other temporary or cyclical concerns are “durable disruptive factors,” according to David Garfield, head of the North America business unit and global consumer products practice at consulting firm AlixPartners. These factors include the increasing digitization of the workplace, changes in underlying consumer behavior and the shifting nature of brands, Garfield says.
“CFOs and their companies are living in a period of monumental disruption,” he notes. “In an election year, there tends to be more uncertainty surrounding regulation and fiscal policy.” He added that how finance chiefs deal with uncertainty is what separates good CFOs from the rest.
“Good CFOs don’t try to time the market. Nobody has a crystal ball,” he says. “They try to create flexibility and act decisively to deal with changes in the market or changes in the political climate.”
