The big beasts are being tamed
AT LAST the veil that has hidden the activities of private companies may be, if not completely torn away, at least drawn partially aside. There is little good news from the BHS affair, which has left thousands jobless and thousands more unsure about whether they will get the pensions they had expected. The report from the Work and Pensions Committee of MPs and its recommendations that large private firms should be bound by some of the rules on governance and transparency affecting public companies may, if enacted into law, produce a benefit – albeit one bought at too high a price. The stark contrast between what we know about large market-listed firms and equally large, but privately owned ones has long been a disgrace.
There are obvious reasons why there might be a disparity in the way these differently structured types of companies should be regarded. A listed entity has an army of shareholders who are the owners of the company and who have an obvious right to know details of its finances and the way it is being managed.
Private companies are evidently not answerable to such a wider constituency and the moguls such as Philip Green who own them have been able to argue that, since the business belongs to them (or in Green’s case nominally to his wife), its affairs are a private matter. But this is only true up to a point.
As the BHS case has amply demonstrated, large companies with large workforces and large pension schemes can very easily be a matter for public concern. In a crisis it will be public established bodies – like the Pension Protection Fund – that may have to step in.
Other companies may also have a reasonable interest in more public disclosure. The failure of a large company and the transition of its pension scheme into the PPF may lead to higher levies being charged on other companies that are covered by the system.
Company failures always have an impact on smaller supplier companies too and, of course, mass redundancies and pension shortfalls are economic, social and political problems. Many private company chiefs have also garnered honours – knighthoods, for example. It may seem petty, but if the honours system is to mean anything, business figures who expect to be considered for such gongs should expect the way they run their businesses to face a little more scrutiny than is currently the case.
The report’s demands are not – and should not be – gilded to become a burden on the vast majority of private companies. But for those of significant scale, it is high time they were more accountable to everyone else who might, if the worst happened, have to pick up the pieces.