FINANCIAL TIMES

Hello and welcome to our weekly intelligence briefing for boards, where we help directors keep up to speed on the macro trends affecting businesses across the world, and corporate governance news.


We hope you enjoy it and, as always, you can find the latest stories and resources on [email protected]

 

Each day FT Leader writers on the Editorial Board meet to discuss the topics to be considered for Leader columns. Here are the issues that dominated this week:


The Editorial Board welcomed an initiative by the SEC to apply tougher disclosure rules to private markets. Needed to level the playing field with public markets, and address the systemic nature of a lightly overseen segment of finance, the change would "increase the public's faith in market capitalism", the leader concluded.


In the eurozone, markets are getting overexcited about the prospect of the ECB taking the same hawkish turn as the Fed and the Bank of England. The recent slump in bond prices ignores that "the eurozone differs in important ways from both the US and the UK" the editorial board argued. "Markets would be wise to heed it."


And for companies with eyes on China and how its reset of Communist capitalism will affect relations with the west, our leader on the Evergrande real estate failure held up evidence of important distinctions being made between onshore and offshore investors. The picture is still murky, however. "China should make greater efforts to be clear to foreign and domestic investors what its policy priorities are."

 

Geopolitical clouds hung over the European economy this week. If Russia invades Ukraine and tougher sanctions are imposed, the EU could be left vulnerable to countermeasures.


This is not just about Moscow cutting gas supplies – trade, manufacturing, banking and markets could all be affected. Indeed, ECB president Christine Lagarde warned that tensions could lead to “increased costs throughout the whole structure of prices” in the eurozone.


Elsewhere, Lagarde struck a cautious tone this week when she signalled that any shift to tighten money policy would be gradual. This contrasts to last week when she refused to rule out a possible rate rise this year, which sparked a sell-off in the bloc’s bond markets.


Huw Pill, the BoE’s chief economist, struck a strikingly similar note when he cautioned against an aggressive approach to raising rates. In a show of solidarity, he also stood by comments made by Andrew Bailey last week who warned that wages need to fall this year to tame inflation. 


But not everyone agrees. Joachim Nagel, the new head of Germany’s central bank, called on Europe to tighten up. “The economy is recovering. The job markets are looking good… That is why monetary policy can become less expansive,” he said.


Indeed, the Fed and ECB’s “continued go-slow approach will force both to tighten more this year than they would have had to otherwise,” argues Mohamed El-Erian, president of Queens’ College, Cambridge – at the expense of securing a soft landing for the economy.


Into governance and issues of corporate culture and the inherent conflicts in compliance investigations were clear to see in our revelations about German publisher Axel Springer and its chief executive Mathias Döpfner’s fight to protect an editor from misconduct claims.


Meanwhile investor activism continued apace. On Tuesday Peloton announced that John Foley would step down as chief executive – though he will become executive chair and retain his supervoting stock. Talk has turned to acquisition, with Nike and Amazon in the mix.


Turmoil at Credit Suisse continued as two major investors said they would vote against any proposal to extend the tenure of vice-chair Severin Schwan. And with a $2.2bn fourth-quarter loss to boot, the Swiss lender has promised 2022 will be a year of transition.


But it hasn’t been a case of wins all round. Taylor Wimpey became the first large UK housebuilder to have a female chief executive when it appointed Jennie Daly this week. The move rebuffed efforts by activist investor Elliott to hire an external candidate.


Likewise, at GSK, chief executive Emma Walmsley promised a “step change in growththis year as the group prepares to spin off its consumer health unit. This came after quarterly profits beat expectations.


Investors should worry about the fightback against Elliott, argues UK business writer Cat Rutter Pooley. GSK, SSE and Taylor Wimpey are laggards from whom Elliott set out to create value – a move shareholders should welcome and boards should not dismiss, she writes.


Another trend to watch is how long Covid could exacerbate labour shortages in the UK. A quarter of UK employers said the condition is now one of the main causes of long-term sick leave, according to a survey by the Chartered Institute of Personnel and Development.


And finally, any directors grappling with the future of the office may heed a warning from work and careers columnist Emma Jacobs: hybrid working erodes employee loyalty.


“If workers spend less time together, their social ties will weaken, as will the attachment to an employer. Meanwhile, the bonds with friends and family strengthen,” she writes.

 

The Financial Reporting Council has been making headlines this week. The watchdog is investigating PwC’s audits of construction contractors Galliford Try and Kier.


Meanwhile, as the industry tribunal over the audit of Carillion took a turn on Tuesday, separately the government announced it had appointed four new non-executive directors to the FRC’s board, with City veteran Sir Jan du Plessis confirmed as chair.


For further reading, recruiters Spencer Stuart published a guide to board composition and refreshment last year.


Don’t forget, there are plenty more resources on our online hub FT.com/Board.

 
 

At our recent event, Global Economic Outlook 2022, Sir Howard Davies, chairman of Natwest Group, explored the trends that will impact the global economy this year.


How will new variants of Covid-19 impact the global economic recovery? How big is the inflation risk in the short- and medium-term? And how will these challenges affect the prospects for global trade? 


You can watch the replay here and read the event summary here.
 

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