These were all areas that were found wanting in the financial crisis, and it is essential that boards get these fundamentals right. Our new proposal will move to a principles-based approach. We have identified five common attributes that effective boards should exhibit, and for which we will have high expectations.
However, the positive feedback between higher profits/wages and higher inflation – where higher corporate profits feed through into higher wages, leading to higher sales prices, which in turn results in even higher profits/wages – is now in place. This is the opposite of the negative feedback that was observed in the deflationary period. To this end, the temperature of the economy is gradually rising.