Well-trained directors can be firm hands in steering companies through pitfalls which may appear. In such an uncertain environment, it will be critical to reinforce the confidence of stakeholders in how our companies are run. This will require both the government and the private sector to play our part. 6. On the regulators’ end, we will continue to make sensible rules that are practical and outcome focused. We will also continue to keep our rules up to date. The Corporate Governance Council, established by MAS, is reviewing the Singapore Code of Corporate Governance and will submit its recommendations to MAS. On its part, the private sector must nurture a pool of well-trained and ethical directors. 7. Being a director will become increasingly demanding. Companies’ operations are getting more international, and the markets for raising capital becoming more complex. Expectations of directors by stakeholders are also growing. 8. Directors are now exposed to substantial legal and reputational risk if they do not, or are perceived not to have, discharged their fiduciary duties for the company. For example, directors of BP have been sued by shareholders over the costs associated with the oil spill in the Gulf of Mexico. Directors of AIG were also sued for not adequately monitoring the firm’s exposure to the subprime mortgage market. BIS Review 164/2010  1  9. Directors should not become defensive or legalistic in face of these challenges.
We all know that stable conditions make it easier to arrive at wise economic decisions. When wages and prices chase each other in an unpredictable way, and both interest rates and the exchange rate fluctuate widely as a result of this, with a certain amount of luck or smartness it is sometimes possible to do good business. But most people surely realise that this is not the best setting for either long-term investment or for those who have to live on an earned income or a pension. The head of the US Federal Reserve, Alan Greenspan, has formulated his view of what monetary policy’s objective should be in roughly these words: inflation should be so low that economic agents do not have to worry about it. Limited room for employment policy Why, then, are there those who still argue that higher inflation would be a good thing? I believe this is mainly because they perceive a conflict between price stability and low unemployment. This perception in turn has its roots in a short-run, cyclical perspective. When economic activity is rising or falling on account of transitory demand fluctuations around a long-term trend, this negative relationship does exist. Rising demand for goods and services generates increased demand for labour and lower unemployment; this tends to be accompanied by rising wages and higher inflation. The opposite also applies. But this does not mean that higher inflation results in permanently higher employment and lastingly lower unemployment.