OPINION: Time for private equity to change

Denial is a wonderful thing. Most people would have thought, after the public attacks on private equity from the media, unions and politicians, that the industry would have got the message that it needs to communicate more.

It may genuinely believe that it is a force for good, but it has failed to convince the public of this.

As Sir David Walker says in his review of industry disclosure, published on Tuesday this week, the focus on business growth has not been matched by a growing awareness of the wider responsibilities that come with size: the private equity industry’s communication has not been bad so much as nonexistent.

The odd thing is that some in the industry still seem not to have got the message. Walker’s report is directed not just to outsiders looking in on the industry, confirming their belief that it should try harder. The report also seems to be seeking to bring the private equity industry along with it, in order to buy into his message and prescriptions for cure. Astonishing though it may seem, there are still elements out there who think nothing needs to be done as the current storm will pass.

It reminds one of Bill Clinton. When told that his dalliance with Monica Lewinsky was the 51st most read news story ever, he asked in some disbelief what a man needed to do to get into the top 50.

The private equity industry generates a similar reaction: what greater level of abuse has to be directed at the industry before they all get the point that they need to change?

One further point. When Walker’s report has served its current purpose it ought to become a standard text for students of PR, because rarely does one see so well laid out the public policy case for communication. His thesis is that the legal requirements for disclosure on firms in the industry are not the benchmark of necessary communication: if they are going to be significant players in the economy, private equity managers must understand that they are entering into unwritten contracts with society that lay down accepted standards of behaviour and ethics.

This requires them to demonstrate that they operate for the benefit of society as a whole, and not just in the narrow interest of their own partners and investors.


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