Standards

Buy-out firms urged to greater openness

Private equity should open itself up to enhanced reporting, with firms filing an online annual report that provides details of board composition and the balance sheet, and includes narrative descriptions of the company’s values and approach to its wider stakeholders, a consultation document from Sir David Walker’s independent review of the industry has recommended.

The consultation added that private equity firms will be expected to be more accessible to specific enquiries from areas such as the media.

Walker warned that by inadequately addressing the legitimate interests of stakeholder groups, buyout firms have “come to be seen as needlessly secretive, feeding suspicion and, in some quarters, close to hostility”.

In response, the TUC said many of Walker’s proposals are to be welcomed; but the union body was not impressed that the recommendations did not go beyond a voluntary code of conduct. Brendan Barber, TUC general secretary, said: “The private equity industry will be hoping that this is the least they have to do to end the controversy. But their critics will see this simply as the first step of many that need to be taken”.

The editorial in the Financial Times (18 July) commented that the onus will be on private equity to prove voluntary action means something: the big firms will no doubt comply, but they should also be willing to support their code by publicly criticising those that do not.

August 2007