Editorial: Codes make sense

Author: | Published: 1 Jul 2008
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When it comes to private equity, targets want reassurance, governments want to meddle and firms themselves want consistency of treatment. But it's rare for all three to be able to compromise. What to do?

The onus is on national governments to collaborate. In the UK, private equity houses have shown that they are willing to cooperate. As Jeremy Hand, chairman of the British Venture Capital and Private Equity Association, describes on page 6, some UK private equity reports are now more thorough than those produced by public companies.

The UK code of conduct has faced criticism, but it does deserve praise. Yes, it asked for less substantive attribution analysis than expected. Yes, it gave longer for annual reports to be published than planned. But it was the first attempt to codify private equity in the world, let alone in Europe.

And it is not afraid to review itself. The Guidelines Monitoring Group (GMG) will independently review the code to ensure that it remains relevant, something that was put under pressure at the end of last month by Sir David Walker, head of the committee that created the code.

He called for a lower disclosure threshold. Presently, the code covers UK companies with more than 1000 employees that were taken private for at least £300 million ($598 million). This will give the GMG food for thought. If it meets this challenge, there can be no argument that the code is soft.

This fluid regulation should be replicated on an international scale. Admittedly, the level of regulation will depend on political appetite, but this is a great starting point.

Otherwise more codes and regulations will start being introduced in individual countries and inconsistency will reign. Denmark has already announced a code and Germany is in the late stages of planning legislation.

Implementing an international code sooner rather than later would create a more standardised and simpler system.

Nicholas Pettifer

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