Business View: So who will bring sovereign funds into line?

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It looks very much as if the private equity industry will sign up to the main recommendations of the Walker Report. Within a few months, the "masters of the universe" will have to get used to living in the public eye, as they publish financial and investor information on the companies they own.

To many, including John McFall, the chairman of the Treasury Select Committee, and several unions, the Walker Report does not go far enough. They are unhappy that the new regime of accountability is based on a voluntary "comply or explain" basis. I am not so sure their fears are justified. Publicly listed companies have for years lived with a voluntary code of conduct on corporate governance. The result? Nearly all plcs abide by the Combined Code guidelines. Those few that don't usually find themselves in the glare of negative publicity and subject to the unwanted attentions of activist investors.

I am confident the same thing will happen with the Walker recommendations. Private equity groups that refuse to accept they have a responsibility to be transparent and open in their dealings will soon become pariahs. Journalists, investors, politicians and unions will ensure they are hung out to dry.

What the Walker Report lacks is any authority to bring sovereign funds into line. These investment vehicles, owned by secretive oil-rich states such as Dubai, Qatar and Saudi Arabia, are highly unlikely to embrace the spirit of Walker. And as oil continues to sell at close to $100 a barrel, the requirement of these funds to spend their vast hoards of cash on buying Western businesses is likely to increase. The hope expressed by the BVCA, the industry body for private equity, is that the voluntary reporting requirements will become a benchmark for other types of large, privately held businesses. On that score, I am altogether less confident.

Cold, hard maths

The board of Northern Rock and the company's trio of investment bank advisers will, in all probability, announce a shortlist of bidders for the troubled bank this week. What has become clear over the past seven days is that the Government is fixated on getting its billions back. The concerns of shareholders in Northern Rock, are, in the words of one bidder I spoke to last week, "somewhat less important". Is this attitude on the part of government the right one or should it care more for the interests of small investors who bought into Northern Rock in the belief that its shares would serve them well in their retirement?

It is a vexing issue but one that boils down to cold, hard maths. The government loan to Northern Rock amounts to around £1,000 for every UK taxpayer, far exceeding the losses that are going to be incurred by investors. So I am afraid the repayment of the loan must come before shareholder considerations. The bottom line is that the value of shares can go down as well as up and investing in equities carries a certain amount of risk.

The other question open to debate is whether the Government should have made its billions available to Northern Rock in the first place. It's somewhat of a moot point as we can only speculate about the impact on the wider UK banking system had Northern Rock been allowed to go to the wall. But now the billions have been handed over, the company and the Government cannot get off the path that will lead to the sale of the bank.

The winner of the Northern Rock auction will be the bidder that can repay the most money to the Government in the quickest possible time. The actual price of the bid is of secondary importance. However, the board of the bank should still do its utmost to ensure that it looks after the interests of shareholders in this dire situation. There is going to be a whole heap of brinkmanship in the weeks and months ahead on the part of the various advisers to Northern Rock and the Government and the bank's shareholders. But all parties know that the longer any bickering goes on, the worse Northern Rock's plight becomes.

Economy routed by Croatia

So England didn't qualify for the Euro 2008 football championships. Frankly, I don't care much one way or the other, but I was slightly surprised at how much this dismal failure by a bunch of grossly overpaid prima donnas is supposedly going to cost the economy. Some estimates have placed the figure at over £2bn. Sorry, but just how does anyone reach this sum? OK, so fans won't spend money flying out to the championships and punters won't be emptying their wallets buying replica shirts, buying kegs of beer or placing ill-advised bets. But given the state of consumer debt, is this such a bad thing? Maybe the money will be used instead to repay credit card bills or saved for a rainy day. At the very least it will probably get spent on something else instead.

And look on the bright side: at least we won't have to endure a penalty shoot-out defeat in the quarter-finals. And let us not forget that the Croatia defeat gave Sports Direct, the awful sports retailer, a good excuse to put out yet another profit warning.