View from the Top: Steady Growth Ahead

U.S. corporate boards of directors think the economy will continue to recover in 2014, but slowly.

NACD overall score Q3/2014On Monday, the National Association of Corporate Directors (NACD) released the results of its quarterly survey of public company directors. The Board Confidence Index (BCI) is designed to provide a snapshot of sentiment about the economy from the perspective of the corporate boardroom. In each quarterly survey, directors are asked to score their attitudes about the economy on a scale that ranges from "substantially worse" (assigned a value of 0 points) to "substantially better" (100 points). Their responses are averaged for each question, so that scores above 50 points indicate a positive outlook, scores below 50 indicate a negative outlook, and scores around 50 indicate uncertainty or neutrality.

The latest BCI results indicate that corporate directors expect the economy to continue improving, but to do so slowly and steadily. The average overall BCI score for Q4/2013 was 58.7. Not only does this indicate a generally positive outlook on economic conditions in the United States, but it's almost 4 points higher than the average 2012 score of 54.8. "The continued improvement in boardroom confidence, though not a dramatic change from years past, points to a positive outlook for 2014," says Ken Daly, president and CEO of the NACD.

future statsRespondents to the NACD survey were asked to rate the current condition of the economy in comparison with other time periods, both past and future. When comparing with one quarter ago, the directors gave today's economy an average rating of 55—a number that's modestly positive. But when they considered how today's economy compares with conditions a full year ago, the directors raised the score to 64. Looking forward, respondents followed a similar pattern. They gave their confidence in the economy one quarter from now an average rating of 54, but rated their confidence in conditions a year from now at 63.

The NACD report takes these trends as a positive sign: "Confidence that is based on short-term criteria can be easily shaken," it points out. "Daily headlines highlighting volatility in the economic climate, geopolitical changes, and the like can exacerbate fears and breed over-cautious thinking. NACD's BCI reflects the views of directors who are tasked to oversee the company with a long-term focus—helping management avoid the fits and starts that an excessive focus on short-term thinking and behavior can bring—producing a confidence metric inherently rooted in progress over years rather than months. In 2013, directors demonstrated their view that the economy is recovering, albeit slowly."

stats on pastIndeed, all five of the primary BCI indicators reflect increased confidence in Q4/2013 compared with the previous period. Confidence in economic conditions one year in the future was up 5 points. Directors' view of the current economy vs. economic conditions one year prior increased by 4 points. And the overall BCI rose by 1.7 points from the third to fourth quarter of last year.

One final positive indicator that the NACD report highlights: Volatility in last year's BCI numbers reached the lowest level since the NACD began collecting this data in 2010. "What sets the 2013 BCI findings apart from previous years has been its stability," the Q3/2014 report says. "This was the first year in which the overall BCI measure did not register a shift of greater than 2 points in either direction between successive quarters. To compare, each of the preceding years saw a change of at least 8 points between two consecutive quarters. Although the change in BCI score from Q3/2013 to Q4/2013 was only a slight uptick, 2013's high average confidence for the year and decreased volatility suggest optimism about future business conditions on the part of board members."


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