Sir David Walker, head of the BVCA-sponsored working party on greater transparency in UK private equity, told a Treasury committee this morning that he would be encouraging the industry to change its ways, outlining some of his proposed plans to improve reporting and disclosure.
However Walker, who put up a robust defence of his independence to the Treasury Select Committee, insisted there was no need for further regulation or legislation, suggesting that a voluntary code was a more sensible solution initially.
Walker’s credentials to lead an independent review were questioned by committee chairman John McFall, but the former Morgan Stanley chairman insisted that the results of his review would speak for themselves. He also distanced himself from the BVCA, even criticising the trade body for the narrow terms of reference he had been given for the review. Walker said he would be “disregarding them for that reason”.
Walker plans to publish the initial results of his review on July 17, ahead of a consultation process, but he outlined some of his initial plans. These include compelling “large portfolio companies” to publish an annual report online four months after their year end, which would include detailed information on the scale and structure of the company’s leverage and a breakdown of the manager’s investor base. He also said he would encourage general partners to talk about their values and their general attitude towards employee matters.
Walker, who said his focus had been almost entirely at the buyout end of the spectrum rather than venture capital, accepted that the industry’s “attentiveness to legitimate stakeholder interests” has not matched its increased significance in the marketplace. In addition to improved reporting by private equity firms to investors about fund and portfolio company performance, better-quality independent research on the industry was also crucial, he suggested.
The City grandee said his code should be introduced on a voluntary, “comply or explain” basis, and suggested that increased public attention would compel firms to follow its guidelines. However, he said, he did not “see a place for regulation or primary legislation” to enforce the code in the first instance, suggesting this could always be used as a fall-back option if it proved difficult to enforce.
Walker was also asked by Conservative MP Brooks Newmark whether other large privately-owned companies should have the same disclosure requirements. He agreed that there should not be different standards applied to private equity, and expressed a hope that his guidelines would eventually be applied to all large private companies across the board.