Distribution Network
Content
Two senior City figures have predicted that private equity will soon embrace CSR.
Stephen Haddrill and Alain Grisay told delegates at Business in the Community’s annual conference in London last month that proponents of socially responsible business need to have confidence in the power of their message, and that there is no reason why companies controlled by private equity firms should behave less responsibly than publicly listed ones.
Haddrill, director of the Association of British Insurers, said he expected private equity-owned companies to adopt social and environmental policies. ‘Sustainable business is as relevant to private equity as to public companies, and I’m optimistic they will see that,’ he said. ‘Let’s not jump too quickly to the conclusion that private equity is beyond public scrutiny. Half of their UK funds come from pension funds or insurance companies, who are themselves under pressure on social and environmental issues, and will demand more accountability. Responsible business is not the preserve of public companies. Let’s have confidence in the power of our message, and that it will leap the ownership boundary.’
Grisay, chief executive of F&C, one of the leading European SRI fund managers, said that private equity firms have ‘historically tended to overlook sustainability issues, sometimes to their detriment’. He predicted that ‘eventually we will see a convergence between private equity and public companies on sustainable business practices’.
Grisay added that there were ‘some serious misconceptions about private equity’, not the least of which was that all such companies slashed jobs. He quoted a recent Financial Times survey showing that the 30 largest private equity deals between 2003 and 2004 created 36,000 new jobs in the UK.
He said private equity owners are ‘extremely demanding of their management’, and that there is no reason to believe they will not be as vigilant as public companies on the social and environmental issues affecting a business’s value.
Haddrill argued that because large companies taken over by private equity often go public again sooner rather than later, ‘there is little to be gained from destroying years of hard work’ on sustainability, ‘only to start again on the return to the market’.
Last month one of Britain’s largest trade unions, the GMB, called for private equity firms to be regulated by a government-backed watchdog that would monitor their social and economic impacts. The union made the call in a submission to the Treasury select committee, which intends to investigate the impact of private equity activity.
Simon Zadek, chief executive of the AccountAbility think-tank, told EP: ‘Private equity might well be persuaded to take social and environmental issues more seriously, particularly under pressure from their sources of debt financing. But their real contribution will lie in their will and ability to invest in new business models for the long term, not just in being compliant to avoid trouble as they seek to return stripped down companies to publicly traded equity markets. They have to prove themselves as real investors, rather than taking profit by intermediating between different financial markets.’
Mark Goyder, founder director of the Tomorrow's Company think-tank, said private equity 'has the potential to be a good vehicle for longer term ownership', but the industry needed to come out and explain itself and its impacts.
He added: 'The companies owned by private equity are covered by the new business review. Two things are needed. First, let these private equity-owned companies do a proper operating and financial review on their purpose, values and key relationships. Second, let the private equity firms themselves be open about how their deals are structured and who stands to gain what time horizon.'
Stephen Haddrill and Alain Grisay told delegates at Business in the Community’s annual conference in London last month that proponents of socially responsible business need to have confidence in the power of their message, and that there is no reason why companies controlled by private equity firms should behave less responsibly than publicly listed ones.
Haddrill, director of the Association of British Insurers, said he expected private equity-owned companies to adopt social and environmental policies. ‘Sustainable business is as relevant to private equity as to public companies, and I’m optimistic they will see that,’ he said. ‘Let’s not jump too quickly to the conclusion that private equity is beyond public scrutiny. Half of their UK funds come from pension funds or insurance companies, who are themselves under pressure on social and environmental issues, and will demand more accountability. Responsible business is not the preserve of public companies. Let’s have confidence in the power of our message, and that it will leap the ownership boundary.’
Grisay, chief executive of F&C, one of the leading European SRI fund managers, said that private equity firms have ‘historically tended to overlook sustainability issues, sometimes to their detriment’. He predicted that ‘eventually we will see a convergence between private equity and public companies on sustainable business practices’.
Grisay added that there were ‘some serious misconceptions about private equity’, not the least of which was that all such companies slashed jobs. He quoted a recent Financial Times survey showing that the 30 largest private equity deals between 2003 and 2004 created 36,000 new jobs in the UK.
He said private equity owners are ‘extremely demanding of their management’, and that there is no reason to believe they will not be as vigilant as public companies on the social and environmental issues affecting a business’s value.
Haddrill argued that because large companies taken over by private equity often go public again sooner rather than later, ‘there is little to be gained from destroying years of hard work’ on sustainability, ‘only to start again on the return to the market’.
Last month one of Britain’s largest trade unions, the GMB, called for private equity firms to be regulated by a government-backed watchdog that would monitor their social and economic impacts. The union made the call in a submission to the Treasury select committee, which intends to investigate the impact of private equity activity.
Simon Zadek, chief executive of the AccountAbility think-tank, told EP: ‘Private equity might well be persuaded to take social and environmental issues more seriously, particularly under pressure from their sources of debt financing. But their real contribution will lie in their will and ability to invest in new business models for the long term, not just in being compliant to avoid trouble as they seek to return stripped down companies to publicly traded equity markets. They have to prove themselves as real investors, rather than taking profit by intermediating between different financial markets.’
Mark Goyder, founder director of the Tomorrow's Company think-tank, said private equity 'has the potential to be a good vehicle for longer term ownership', but the industry needed to come out and explain itself and its impacts.
He added: 'The companies owned by private equity are covered by the new business review. Two things are needed. First, let these private equity-owned companies do a proper operating and financial review on their purpose, values and key relationships. Second, let the private equity firms themselves be open about how their deals are structured and who stands to gain what time horizon.'
Super Featured
No
Featured
No