A new survey of European board directors highlights their growing concern over the rising liability risks of sitting on other people's boards as corporate governance reform spreads. The British, French, and Italians are the most worried. Least worried are the Germans: there, directors' liability has long been regarded as a non-issue on boards that exude a country-club atmosphere.
Attitudes are nonetheless changing in Germany, especially in companies with big US exposure where litigation risks are highest. Just ask Daimler directors about the legal nightmare over the Chrysler merger. Nor should the ultimate acquittal of Mannesmann directors in the Vodafone affair give false comfort.
The Mannesmann trial raises a broader issue. Should chief executives sit on other companies' boards? Deutsche Bank's Josef Ackermann may have been relieved by the trial's outcome but the affair was a disaster in many other ways. Simply put, the head of Germany's biggest bank spent seven gruelling months defending himself together with fellow directors in court. Far better if he had devoted the time to concentrating on running his banking business.
Various new corporate governance codes now recommend limiting the number of directorships. It may well make sense for a CEO to sit on the board of a company in which his group has a strategic interest such as an important joint venture. In all other cases, it would be best if CEOs stuck solely to their companies. It would help them concentrate on their main task and avoid unnecessarily damaging litigation risks.
Italy’s Eni dilemma
Rome wants to raise a further €100bn from privatisations to cut its state deficit to conform to European rules. The problem is the most valuable asset left to sell is its 30 per cent stake in oil group Eni.
Shedding this stake could raise anything up to €30bn. But doing so would put the country's biggest and most profitable company at risk of foreign takeover. Is Rome prepared to take the plunge? The short answer is no.
Answering a question during a parliamentary hearing, the veteran Eni boss, Vittorio Mincato, warned the company risked being snapped up by a rival if the government sold its remaining stake. The response by Domenico Siniscalco, treasury minister, was quick. Rome is keeping its stake.
Of all Italian companies, Eni and Formula 1 icon Ferrari are the two that would provoke a popular uprising should they pass into foreign ownership. Ferrari nearly did when Ford proposed to buy it before Fiat came to the rescue.
Total and Shell would readily gobble up Eni. For Italy's public finances, that would not be too bad since they would have to offer a hefty premium. But for Rome it would be political suicide.
The alternative? Encouraging Eni to double its size, turning it into predator rather than prey. But to finance an acquisition campaign Eni would need to use its shares as well as cash. That would dilute Rome's stake. It would make Eni more vulnerable but more expensive to acquire - pricing it as a normal company on its asset value.
Impact of oil
Crude oil hit new records again on Monday. How worried should Europe's policy-makers be? A return to 1970s-style stagflation may not be an imminent menace but, with signals mixed about the sustainability of economic recovery, monetary policy decisions are getting harder.
At the European Central Bank economic optimism has given way to uncertainty, bringing into question the timing of a rise in eurozone interest rates from the current 2 per cent.
Senior central bankers believe oil prices contain a risk premium because of Middle East political instability, and think it likely the bubble will at some point deflate.
They cannot be certain, though. The oil market is notoriously hard to predict and, with little spare production capacity, the slightest supply disruptions put pressure on prices.
The economic impact is equally opaque, although bankers admit it is likely to be "not negligible". ECB officials think a $50-a-barrel price sustained for a year could cut 0.3-0.4 per cent from European economic growth, although some models put it as high as 2 per cent.
But is $50 the ceiling, or could it go to $60 or $70? While higher oil prices push up inflation, the balance of risk may be shifting to the impact on growth. It points to leaving rates on hold until there is clearer evidence of sustained recovery in domestic demand.
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