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virtue associated with private equity, namely its capacity to evade the public disclosure regime, ultimately became its Achilles Heel. It made the industry particularly vulnerable to critiques based on transparency and accountability deficiencies.

While opacity is common to many alternative investment vehicles, private equity has a very public face. Moreover, the extent to which iconic (and profitable) corporations were being de-listed and restructured had an immediate market as well as socio-political impact. In such circumstances, stonewalling by the industry was simply untenable. As the industry-sponsored review into its operations in the United Kingdom acknowledged: ‘The context for this enquiry is that a position that full disclosures and reporting to limited partners, the ultimate owners of private equity, are alone sufficient is no longer politically and otherwise sustainable, at least in respect of the largest portfolio companies.’108 According to the review, the only way to reduce contestation was to attend to the interlocking needs of legitimacy and authority. As Walker maintains,

the source of business legitimacy is economic success, and the means of maintaining the undisturbed authority of business and business leaders is by clear and continuous demonstration of that success. On this approach, the legitimacy of authority, importantly including that of the leaders of private equity, is likely to be easiest to defend in a competitive market where commercial success and the authority and rewards that go with it are the

direct result of demonstrable superiority in meeting consumer needs.


In order to achieve this, the Walker Guidelines maintain that attention to integrity dimension is crucial.

What is meant by decency and integrity is more substantive than conformity with contractual provision or the law: it relates to a set of principles and values that cannot be encapsulated in a detailed set of rules. Second, standards of conduct are contagious, and malpractice in a particular business situation can have a powerful negative effect on general expectations of what is and what is not normal business conduct and weaken the legitimacy of

corporate structures as a whole.


Walker goes further, however, by attending to the controversial question of whether implicit contracts (determined by context) require attention.

The effective mechanism of enforcement of such implicit contracts is not legal process but the requirements of the parties to go on doing business together…This does not of course mean that implicit contracts are merely what all stakeholders would like them to be….But it does mean that reasonable expectations as to behaviour in matters such as appropriate communication, including its style and timeliness, should not be



A similar dynamic is now facing the Sovereign Wealth Funds. Indeed it is in the sector’s interest to take a much more active approach in overseeing portfolio corporations, if only to safeguard their investment. Misguided reliance on the bureaucratic, legal and political domains in developed markets has demonstrated that

108 Walker Working Group, Guidelines for Disclosure and Transparency in Private Equity (2007) <http://walkerworkinggroup.com/sites/10051/files/wwg_report_final.pdf> at 40.


Ibid, at 16-17.






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