What is the Commissions view as regards corporate governance in the private equity industry? What does it think about allegations of asset stripping in the buy-out market?
The report presents some strong arguments explaining how the industry plays a positive role with regard to introducing corporate governance concepts (transparency and disclosure, corporate reporting and decision making etc.) to new businesses and challenging the management of established businesses in which it invests. The Commission considers that the negotiated/contractual nature of the relationships between investors and fund managers, and the active involvement of the manager in the portfolio companies within the investment process is an important part of this argument. An emotive issue, especially where it has affected employment levels within investee companies, has been the practice of dismantling an acquired business by selling off operational and/or financial assets. However, such operations may reasonably be an element in turning around an underperforming or failing business, whether in the private or the public markets.
