Chief financial officers last year raised billions of dollars to stabilize their companies' finances, cut costs and pivoted their businesses to respond to the coronavirus pandemic and the ensuing economic downturn.
As executives look ahead, vaccines against Covid-19 -- greenlighted by U.S. authorities in recent weeks -- are expected to boost growth in the second half of 2021, as Americans return to offices, shopping malls and gyms.
Here are 10 things that could be top of mind for CFOs in 2021.
Finance chiefs expect their companies' revenue to rise by an average of 6.9% in 2021, up from a 0.3% increase forecast for 2020, according to a recent survey by Duke University's Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. Executives will be monitoring potential setbacks to the economic recovery, especially in industries hit hard by the pandemic, such as travel, hospitality and bricks-and-mortar retail.
President-elect Joe Biden has proposed raising the corporate-tax rate to 28%, up from the current 21%, alongside other measures. The new administration can shape tax policy even without a majority in Congress, for example by providing additional guidance on existing rules through the Treasury Department, said Greg Engel, vice chair for tax at professional services firm KPMG LLP.
CFOs also will keep track of potential changes around taxation of global companies, as suggested by the Organization for Economic Cooperation and Development. Those plans could pick up pace in 2021.
Finance executives are preparing for potential regulatory changes, including in areas such as accounting and audit. Mr. Biden is expected to nominate a new head for the Securities and Exchange Commission, who would work toward increased regulatory scrutiny of companies' financial reporting. New leadership at the SEC could influence the agenda at the Public Company Accounting Oversight Board to include elements such as mandatory audit-firm rotation or stricter rules for auditors.
Executives will be on the lookout for potential changes to the U.S.'s trade policies in relation to China, the European Union and other countries whose goods currently incur tariffs. Companies also will be dissecting the details of the new trade agreement between the U.K. and the EU, which was agreed in late December after years of negotiations.
Cash and Capital Expenditures
Finance chiefs ramped up their companies' liquidity in the early months of the coronavirus pandemic. Executives could reallocate some of these funds amid low interest rates, use them to pay for mergers and acquisitions, reduce debt or boost their pension plans. CFOs also are reviewing their spending plans for capital expenditures, especially in industries that have benefited from changing consumer tastes in recent months.
Mergers and Acquisitions, Listings
Companies with cash reserves are expected to scour the market for potential targets, said Robert Brown, chief executive of the North America business at Lincoln International, an investment bank. Private businesses also could take advantage of high stock valuations to plan an initial public offering, a direct listing or a transaction with a special-purpose acquisition vehicle.
A sizable number of U.S. employees are expected to work from home for a part of 2021 as the pandemic drags on, and seek flexible-work options in the future. Finance executives will be taking a closer look at their companies' real-estate footprint and assessing the pros and cons of moving offices. They will review potential investments to alter the layout of their offices and see whether increased levels of productivity -- an outcome of widespread work from home in 2020 -- are here to stay.
Dividends and Share Buybacks
Many companies paused paying dividends or buying back shares at the onset of the pandemic. While some companies resumed those payments and programs in the second half of 2020, others have continued to hold back. In 2021, CFOs will be weighing dividend payments and share-repurchase programs against other uses of corporate cash. Timken Co., a North Canton, Ohio-based maker of engineered bearings and power-transmission products, plans to hike its dividend if the business does well, said finance chief Philip Fracassa. The company also could consider repurchasing shares if it doesn't do mergers and acquisitions, Mr. Fracassa said.
Finance chiefs likely will face more questions from shareholders about their businesses' performance in terms of environmental, social and governance issues, as investors pay more attention to these topics. Companies also could be required to disclose more information on carbon emissions, diversity and other social and sustainability metrics under the incoming Biden administration. Mr. Biden campaigned on requiring companies to provide more detail on environmental risks and greenhouse-gas emissions.
Global regulators decided to phase out the London interbank offered rate -- an interest-rate benchmark underpinning trillions of dollars worth of financial instruments -- after concluding it was prone to manipulation. U.S. banks and companies face a Dec. 31, 2021, deadline to replace Libor with alternative rates for new contracts, followed by another deadline in June 2023 for existing or so-called legacy contracts.
--Kristin Broughton and Mark Maurer contributed to this article.