They must declare their interests/But not their company cars

Head of private equity lobby group resigns.

Just days after receiving a verbal mauling from MPs, Peter Linthwaite has quit his job as chief executive of the British Venture Capital Association (BVCA).

His departure follows a revolt by BVCA’s powerful private equity members, who are unhappy with his failure to fend off the rising tide of criticism from politicians and trade unions. This reached new levels on Tuesday, when MPs savaged Mr Linthwaite at the Commons’ Treasury committee’s inquiry into the industry.

The meeting to which this refers was indeed one in which the equity bosses got quite a bit of a kicking-around.

Three officials of the British Private Equity and Venture Capital Association engaged in fierce exchanges with MPs over the extent and nature of tax advantages enjoyed private equity executives, and over the involvement or not of workers in takeover deals. They faced an hour-long grilling by MPs asking if there was a need to impose tighter regulation and make changes to the tax rules.

So the head of the BVCA is leaving because he can’t stop Private Equity getting a bad name? For an industry whose execs pull down the word’s highest salaries, they’re a bit bloody thin-skinned – what did they think was going to happen? If they think they can earn salaries and benefits in the billions while paying 10% on it to the treasury and not lose out in the court of public opinion, they’re insane.

Me, I object to private equity on purely welfarist grounds, based upon the model of making money employed: (1) buy firm, (2) cut costs/increase profitability, (3) sell at profit, keeping some for yourself, (4) repeat (1) to (3), become a billionaire.

Step (2), see, like shitty Execs pursuing the magical 7%, typically involves job losses without any long-term gains in efficiency. I.e. innocent workers lose big, but society really doesn’t gain anything overall. We just see a massive transfer of surplus from poor to rich.

What does interest me, though, is what will become of Private Equity. There’s an endgame to this – eventually there’ll be nothing left to buy and nobody else to sell to. Private Equity will start to eat itself, I would expect, but it will all eventually collapse upon itself, leaving nothing but unbelievable wealthy individuals who never know when enough is enough. I wonder what they’ll do.


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