Heard in the Suite—Economic Turnaround Not Expected Until 2010

This feature highlights member statements on emerging trends, challenges to conventional wisdom, and underreported news.

When asked when the economy will start to come out of this downturn, approximately 70% of Corporate Strategy Board members who responded to a recent survey predicted that the turnaround would come no sooner than 2010. This outlook stands in contrast to analyst opinions in the news media that suggest an economic recovery beginning in the second half of 2009. “It’s easy to forget this, but credit defaults have a very long tail. Consumers will have a delayed recovery to the GDP because they will still be losing their houses long after the market comes back.”

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Leaders Should Open Communication Channels in Times of Crisis

The Wall Street Journal, 24 October 2008

It's more important than ever for company leaders to communicate clearly to employees when the business is experiencing turmoil—but that's not happening, according to a new study.

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Our view: The number of disengaged employees has increased 45% since the start of the year, up from 1 in 10 employees in 2007, according to the Corporate Leadership Council. While executives or senior managers may have reservations about speaking candidly to employees, not doing so may result in the loss of critical talent.

Finance Budgets Declining at Least 3.7% in 2009

Corporate Executive Board, October 2008

Companies participating in our annual finance function benchmarks are projecting an average finance budget decline of 3.7% in 2009. In 2008, finance departments made the deepest cuts in spending on SOX and Internal Controls and pared back investments in transaction processing, internal audit, reporting, finance IT and finance general management. Finance departments increased spending on risk management, treasury, forecasting, and decision support, reflecting heightened focus on risk and business performance.

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Large Debt Forces Tough Decisions

The Wall Street Journal, 27 October 2008

The United State's largest casino company, Harrah's, faces large debt payments that are forcing the private equity–owned company to look for new ways to create marketing buzz without spending much-needed cash. Harrah's has enough cash to survive in the near term, but may be hard pressed to outlast an extended consumer crisis, according to industry watchers.

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Our view: Many private equity–owned companies are concerned about meeting debt service requirements given their high degree of leverage and are asking portfolio companies to draw down on their credit lines. This strategy reflects a gamble similar to a home owner drawing down their home equity line to pay their mortgage in the hopes that things will get better in the future before they run out of cash.

Farmers to Cut Agricultural Production as Credit Tightens

Bloomberg, 27 October 2008

Harvests of the biggest food crops may drop 4.4% next year, according to industry analysts. Futures contracts on the Chicago Board of Trade reflect lower production, showing that wheat will jump 16.0% by the end of 2009, corn will rise 15.0%, and soybeans will gain 3.0%.

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Daily Capital Markets Review: Late Sell-Off Sends Stocks to 5-Year Lows

Corporate Executive Board, 27 October 2008

This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (instead of the next morning), please click here.

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