In the summer of 2007, a collection of leaders from across the private equity industry were feeling the heat – not from the June sunshine or, indeed, from the impending global financial crisis, but from a roasting they were being given by British MPs. The UK Parliament Treasury select committee was eager to find out whether the private equity bosses were playing fair with society, particularly regarding issues such as tax.
Since those hearings and, more significantly, the damage wreaked on the industry by the financial crisis, private equity has quietly set about rebuilding its reputation, washing away the perception once widely held across Europe that they are vultures, doing little to help the companies in which they invest.
With the covid-19 outbreak, corporate conduct is firmly back in the spotlight and firms will do well to remember that their behaviour and the way in which they communicate now will determine external perceptions and their reputation for years to come, ultimately impacting their licence to operate.
The full impact the virus will have over the long-term is still unknown, but it has already had a profound effect on most businesses and individuals’ lives. With the inevitable analysis of firms’ responses to the covid-19 outbreak around the corner, GPs need to adopt a proactive approach to assertively shape the narrative.
One way of doing this is to ensure firms adhere to a set of fundamental principles that are reflected across operations and activities:
Be first – make sure key information is provided by you first. GPs are not known to overcommunicate, but this situation calls for a different approach and more proactive reassurance to all stakeholders, whether LPs invested in their funds or employees working remotely.
Be right – triple check the facts before communicating and exercise caution not to overstate or overpromise. It is easier to provide further updates at a later stage than to backtrack.
Show awareness – be cognizant of the wider issues being faced by society when making business decisions, such as government aid and whether private equity firms should be allowed to access this benefit when it is widely perceived that they have large levels of dry powder at their disposal.
Promote action – show leadership, both internally and externally. Many GPs have been quick to respond to the pandemic, offering financial as well as in-kind support. As investments restart, the industry must not forget their values and look at opportunities through the lens of wider societal reconstruction.
The coming months will no doubt present a number of challenges. However, having a clearly defined strategy and policy of honesty will go a long way to protecting the good reputations that so many private equity firms have worked hard to build.
Andrew Honnor is managing partner at Greenbrook, a specialist communications advisor to the investment industry.