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 growth” this 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.
