The company is the vehicle that creates wealth. What happens to an economy and a society when major investors start to pressure boards to do what is right for them rather than what is right for the company?

It is time we tackled the confusion surrounding the rights and responsibilities of ownership in our fast-changing capital markets; and that is exactly what Tomorrow's Company intends to do over the coming months in our new project on ownership.

My first trip out of the new St Pancras to Brussels has me once more saying a heartfelt thank you to those economic and engineering pioneers who made it possible to go from London to Brussels in the time less fortunate travellers would spend getting from the car park to the gate at Heathrow.

I actually quoted this as a triumph recently when speaking to a group of bankers when offering examples of the more visionary projects that they might support in the interests of the planet.  That brought a belly laugh, of course, because the original investors lost out in a big way. Yes, I said, but look at the benefits to all of us.

A suitable thought to prepare myself to speak in a panel at EcoDa (the European Institute of Directors) on “Private Equity and Corporate Governance: perfect marriage or contradiction in terms?”

The keynote speech was ferocious. It came from Mme Pervenche Beres, Chairwoman of the European Parliament’s Committee on Economic and monetary affairs. She was in no doubt: The current credit crisis proves that self-regulation does not work. The private equity (PE) industry is not serious in its attempts to clean up its act. It is playing for time.

She accepted that some PE firms were OK. Some contributed to the turnaround of firms, and some had helped develop green investments. Early stage venture capital was often a good thing. But regulation was now needed at an EU level.

Any questions? Yes, Javier Echerri, Secretary General of the European Private Equity and venture Capital Association had more than a question. He found Mme Beres’ remarks ideological. The industry was bending over backwards to regulate itself. It imposed ethical and good governance codes on all its members. Look at the AA in the UK. When it was owned by a public company its reporting was confined to one page. Under its private equity owners there were 88 pages.  PE had gone way beyond what investors in other asset classes had done.

Ah, said Mme Beres. It’s all very well for you to talk about the expectations of your own little world. What I am talking about is social control. You have an impact on ordinary people in society. Are you denying society the right to control you? In a democracy there is power and there is counter power.

And before further debate could take place, off swept Mme Beres to her next engagement in the parliament building, leaving the room of eighty representatives of private equity to catch their breath.

Next up was Claire Bury, Head of Unit at DG Markt at the European Commission and a barrister by training.  It was a bit like a hurricane followed by the shipping forecast. In measured terms she explained the market-friendly approach of her masters. In the eyes of  the Commission PE had a valuable role to play. She was interested in the work of the Walker Committee in the UK and wanted to ask whether we thought this had a value and might be worth trying in other EU countries.

I was next to speak. I said that the polarised debate we had heard was an old story.  In one corner was business – a bit too pleased with itself and not seeming to stay ahead of the expectations of society. In the other were its critics, seeing business as predatory, interested only in making money. All the time business gives the impression that it is simply interested in making money, society will mistrust it and the regulatory threat will grow and eventually business will be caught up in a fresh round of regulation.

What we need, I argued, is a foundation for the debate that offers some shared values on which we can all build.  Society needs business. Business needs society. Society needs to value wealth (and wealthy) creation. Business needs to embrace its social role, and show the value it is adding to human wellbeing and demonstrate that it cares about something more than moneymaking.

What’s more, even the most hard nosed and narrow business person needs to recognise that it is in their interest to respond in this way. Otherwise what you get is an Enron-style Sarbanes Oxley backlash.

Private equity, I suggested,  does provide a useful function as part of the total ecology of the market economy. It may well be, as the Mckinsey evidence which we quoted in our evidence to the Walker Committee suggests, that only the top 25% of private equity deals really make superior returns to shareholders. It may well be, as the article in that day’s FT (1 April 08)  suggests, that much of the apparent advantage to private equity has actually come through leverage (borrowing more money cheaply) rather than superior performance of the companies invested in. But I know from personal experience that many a sleepy company has been transformed in performance by a private equity financed management buyout.

So, to answer Claire’s question, I was in favour a of a voluntarist approach, as recommended by Sir David Walker for private equity in the UK. I explained that this was part of a British tradition that goes back to the Cadbury Report. The government threatens action but gives the industry time to sort itself out first.

But there are some qualifications. First, business needs to be challenged to say what its values are. Second, in private equity as elsewhere, we should challenge investors to set out their objectives, their timescales, their values, their commitments and then hold them to account in their actual performance.

At the same time I was with other speakers in arguing that there could be conflicts of interest in private equity that needed special attention. The interests of the general partners (the people who put the deal together in the first place, and are effectively paid a management fee as well as the capital gains at the end of a successful period of management) were not the same as the limited liability companies – other investors who agree to join them.  I argued that there needed to be complete transparency in listing who the investors were and getting them to state their time horizons and what they stood to gain from a successful exit.  

But, like other speakers, I suggested that it was not that helpful to single out private equity. We seem to have had a series of witch hunts against asset classes. First it was the evil of hedge funds. Next it was private equity. Now it seems to be overseeing wealth funds. This is an unproductive debate.

Ownership is changing as capital markets become more global . What matters is that there are some responsibilities which fall upon owners. We need to work out what these responsibilities are.

The next speaker was Lutgart van den Berge

I have spoken on platforms with Lutgart before. She speaks a lot of sense. She is executive director of a governance consultancy called Guberna and  a part-time professor of corporate governance at Ghent University. She too said we need to look at governance across all asset classes. She endorsed the “enlightened shareholder value” view which she credited to Tomorrow’s Company  - now that is speaking sense! She said conflicts of interest are an issue but we can learn from the experience of continental European companies who have dealt with the conflict between directors as board members and directors as shareholders. She agreed with my proposition that we needed to deal with the duties of shareholders and said that one of the outcomes of the consultation on the recent Lippens Corporate Governance report in Belgium was the importance of the duties of shareholders.

Other speakers agreed that with private equity came potential conflicts. Board members with a private equity interest were looking for an earlier exit. Against this it was asserted that no exit was possible unless someone else was willing to take up the ownership stake that was being sold.

In the next session I learned a lot from the Finnish contributors. Tom Palmberg, a distinguished banker, and NED from Helsinki drew our attention to Finnish company law. The reason that this was the only country in Europe that had not legislated specially for private equity was because their company law was so ambiguous.

• A limited company shall be a legal person distinct from its shareholders
• The shareholders shall have no liability for the obligations of the company
• The purpose of the company is to generate profits for the shareholders unless otherwise provided in the articles of association
• All shares shall carry the same rights, unless it is otherwise provided in the articles of association

In Tom’s mind this duty to promote the profitability of the company, meant long term profitability. So thinking about their interests as shareholders looking for a short term gain was just plain contrary to the law.

But then Ikka Harju from the Ministry of Finance in Finland, who works as a civil servant drafting securities legislation, raised with me the issue about international financial institutions coming from outside Finland and wanting to buy into enterprises there. There was a question of how to impose duties on overseas investors. I argued that before getting into the realms of legal prescription there was a value in requiring people to state what their investment perspectives were.

In conclusion, there was general agreement that we need to find ways to ensure that directors of a business are committed to the long term and this concern is not limited to private equity. There are some potential conflicts of interest which could make private equity a case where special vigilance is needed and here is where independent directors and potentially even an independent chairman can make a difference. Views varied as to whether there is a difference between PE and the family firm. To some the family firm is distinguished by the fact that the quarter they are focusing on is the next quarter century, not the next quarter year. To others “it doesn’t matter whether the shareholder is my grandmother as a small shareholder or a major private equity player”. To this participant in each case the objective is that directors must act as directors and investors have a different role.

Miles Templeman gave the example of Yo Sushi which had been through three incarnations. First it was a privately owned entrepreneurial company but relatively sluggish. Then  it was taken on by a second private equity owner who strengthened it and improved performance. Then it was sold again to a third private equity firm whose plan is to internationalise its franchise.

Each stage had seen an improvement in ambition, aggression and achievement.

Citing the advantage of continuity of culture, claimed by John Lewis, I asked whether these changes of ownership cumulatively damaged the culture with which the company had started. No, thought Miles, because the change in ownership is a relatively remote thing for most people. It is the management and the board who stayed reasonably constant. If the performance was bad ownership would have to change whatever the culture – he had been on the board of family companies where this had to happen.

The intensity of this debate about private equity showed me that ownership makes a difference, but still leaves me wondering how, exactly. Which is why Tomorrow’s Company is to spend so much time on the question!

Back through the traffic. Change Eurostars at Lille – if only it was that easy. Instead of just changing trains, they make you come out,  re-register, go through security again and buy a new ticket just to get to Ashford - a station specially built to handle direct Eurostar passengers but now frozen out by a change of mind. Hundreds of business relocated on the assumption Ashford International meant what it said.  That is the infuriating thing about British infrastructure planning – we keep changing our minds.

It is not just changes of ownership that can disrupt business life!

Mark Goyder

Sydney

This is actually being written on the last leg of the journey back to London from Bangkok.

I had naively settled into my seat and spread my possessions around me in the untidy fashion that makes me feel at home. I hadn't realised they all had to enter Thailand, following a tortuous route past shops and security checks and so on board again. I braced myself for Thailand, stepped into the terminal and heard over the airport loudspeakers that very Asian refrain "Over the sea to Skye".

Unlike sunny and largely dry Melbourne, Sydney has had a rotten summer - storms and floods, mostly. Planes between the two cities were being delayed and cancelled as lightning storms temporarily closed Sydney. I was two hours late and dinner with friend Anne was delayed. Anne - who works for a major US multinational shocked me by saying the IT in the city was primitive and it could take her 15 minutes to send an email.

That was before I tried sending an email from the Sheraton. "Australia really does seem a long way away when you work here and people in America don't seem to take emails from here nearly as seriously and then they schedule teleconferences at 4 in the morning and wonder why no-one shows up!"

She also says Sydney suffers from a serious talent shortage: those who are here tend to have done their stint in Europe or the States and come back to raise families, but they have to work intensely..at least until 4.30 on Friday when everyone in her office stops for drinks in the office that appear to be paid for by the firm and go on until 7.30!

The talent shortage is confirmed at the KPMG hosted lunch. The average age in the firm is 29: people are getting responsibility early, which makes it interesting when they second them to a talent-starved government department where they are working alongside 55 year old public servants!

Anne walks me back through driving rain from The Rocks to the hotel at Darling Harbour. We step through torrents of water and back at the hotel I resort to stuffing newspaper inside my only pair of shoes to dry them for the morning.

Friday morning - last day of the tour. I wake at 5, for the first time discombobulated by travel, and do some work before jogging and then breakfasting in rare Darling harbour sunshine near the monorail.

I manage a podcast interview with Bill Beerworth, a sort of Australian Philip Goldenberg (the UK company lawyer who first alerted Tomorrow’s Companies to the failure of UK directors to understand their duties). Bill is a confident, extrovert, sharp and passionate lawyer who bemoans the inability of Australian business or its law system to think holistically about success. He now runs his own investment bank and is very enthusiastic having read the report that this should be widely propagated and perhaps used as a catalyst to influence a review of company law.

We have our own talent shortage. There have been one or two cancellations for the lunch and the man from the pharmaceutical trade association is obviously in tomorrow's trade association as he hasn't made today at all. Professor Thomas Clarke is there - the same Tom Clarke who, when professor of Corporate Governance in Leeds in 1994 organised a consultative conference with us on the original interim report of 1994 and hired a special train to get London delegates there and back in good  humour. He is now Professor at UTS here and a visiting professor in Paris - who says Corporate Governance is dull?!

Tom has compiled a huge book on corporate governance - about 600 pages. He persuaded Adrian Cadbury to write the short preface and was speculating about how to make the most of Adrian's fame in promoting such a book. He is now seriously considering my suggestion that he call it a short essay on corporate governance by Adrian Cadbury - with a long postscript by Thomas Clarke!

Also at the lunch there is the chairman of an energy company, three CEOs, and a think-tanker.

Ian Barlow introduces proceedings as always simply but with great endorsement of TC and our standing, and how he and KPMG had found the challenges of working with us so valuable. Ian is a supporter rare in his level of belief and loyalty and it has been fascinating to watch him at work with KPMG colleagues around the world - a real federal global business of 110,000 people where no-one has to co-operate with anyone else. Ian will ask and reciprocate favours of these colleagues whose respect and friendship he has earned. This is the global company as global network. Ian shows the same courtesy and generosity to TC.

Ian's father is Sir William Barlow, a distinguished engineer and CEO. His mother's parents came to Melbourne at the beginning of the war when they were on a sales trip - sold papermaking equipment - and got stranded here in Australia, leaving their teenage children in England.

Incidentally when we caught up in Sydney Ian's feedback was that the Melbourne debate had been excellent and said he likes the store of examples "from your excellent random access memory". He had the same high opinion of the Sydney discussion.

The question of inequality comes up, as in Melbourne. We are asked how all this report fits with the Millennium Development Goals; about whether the report implies that national government has become unimportant as business becomes more global; soon as in Melbourne the discussion turns to the capital market short termism which most people around this table feel has disfigured business and handicaps it from addressing a wider role. Chris Jordan, the extrovert KPMG Sydney Chairman shows interest in the vital question of values and asks if their presence or absence can be measured. We talk about the idea of the "behavioural audit trail".

The lunch is superb in the fragments of time I get to touch it - something called "marron's tails" which are even better than fat tiger prawns and go so well with those crisp aussie whites!

Melbourne

What a lovely city: hotel room faces Catholic cathedral and yesterday when we arrived I longed to walk and explore but only managed a quick coffee in the sunshine with Ian and then late on my own half an hour by the Yarra River where crews were preparing for an evening's rowing. Main streets wide and tree lined; much more colourful than I remember from a brief visit in 1995.

Format for the event was a CEO lunch, with the addition of three TC guests.

Ian always starts his talks by saying we took two years to produce a report lasting 29 pages: if we had taken longer we could have made it even shorter. I have taken to saying that having been involved in these questions for over 15 years it was time I got my conclusions down to a postcard or postage stamp, and my short summary of what is in the report would be

"Yesterday's societal issues become today's customer issues and tomorrow's shareholder concerns"

I always like a local example to illustrate, and this time I kept it in the family. My great great Uncle was George Woodroffe Goyder, who as Surveyor General of South Australia from 1861 to 94 once rode 20,000 miles in 20 months to trace the contours of rainfall and fertility across the land and drew "Goyder's line" to recommend the limits of viable farming. This guidance had stood the test of 140 years until global warming, and there was a gloomy article I had found in this month's The Australian newspaper about a third generation farmer just inside the Goyder line whose crop had failed two successive years - because of climate change. Entitled "Where Goyder made his mark" the newspaper article (to read click here) was an appropriate illustration of the interconnectedness of everything: the market has been brilliant at producing more wealth but its by-products are threatening life and livelihood in so many ways. Hence the need for business to get involved in shaping the new and better frameworks within which it might compete sustainably.

And so to discussion, skilfully facilitated by Michael Andrew, Australian KPMG Chairman.

Here were some of the questions and comments

• Lee Raymond earned tens of millions of dollars  in the five years in which he was CEO of Exxon. How do we see the inequality in remuneration and what is the lowest inequality we can accept in society - this got us into a discussion of the paradox that the knowledge economy is a more unequal economy, and my argument that business should be more honest about warning that this is likely to be the case
• What is the business case for companies to get more involved in issues like global warming?
• How can business communicate to capital markets in a way they really understand?
• It's not just communicating to capital markets; the same applies internally. In the big oil company one participant worked for, he described thousands of occasions of sitting through people making the case for investment in their project, and hundreds of post project appraisals where we all agreed the problem was that we were not honest and real in our approach to the investor. How do we introduce this level of honesty?
• This report seems very corporate: it is all about companies and CSR (the person who made this comment confessed afterwards that he had not yet read the report!
• How do we prepare leaders in companies to lead in the ways needed for this very different world?
• We seem to be confusing two problems. One is which horses to back = how investors and others can truly assess companies. The other is "are these the right kinds of horses?" = arguments about the purpose and nature of the company.
• From a professor of accounting   - how can we overcome the apparent narrowness of the training of accountants and other business professionals. He was a bit shocked when I answered  (from a personal rather than a TC perspective) "make them all do national community service so they have to deal with people of shapes and sizes and religions" One CEO round the table then quipped : that will give them the experience of being powerless which is the most important experience to prepare you for being a leader!

I have no idea - yet - how well Ian and I dealt with these issues but a lot of people stayed afterwards and said they would like to see deeper dialogue about these important questions in Australia.

And so to the airport, where every plane supposed to be flying to Sydney seems to have mechanical delays or be delayed by the dismal weather and thunderstorms that have dogged Sydney all summer. Extreme weather really is hard to ignore here.

I slept well last night but my eyelids are beginning to feel heavy and I look forward to a catnap on the plane before my delayed dinner with an old friend in Sydney.

We are whisked along clean highways to the Raffles hotel - this is about all I will see of the country.

The hotel is as elegant as the airport but in a spacious imperial style that justifies its fame. Customer service doesn't do better than your average Hilton, and the swimming pool is surrounded not by shipping magnates or rubber barons but by overweight Europeans reading thrillers.

We have about 3 hours of afternoon before preparations for the evening. I find a second present for the redoubtable Christine Sim, the training and development professional and TC champion whose unsolicited call in late 06 created the momentum for us to get things moving in Singapore.

I do some research on the internet (when my personally assigned valet after 20 minutes finds me a cable!) Singapore has a ten year rolling plan for environmental mitigation, divided into 6 categories climate, air, water etc. But there is less sign than in Hong Kong of businesses being in the vanguard and this is confirmed at the consultation: a journalist explains that people here expect government to take all the initiatives.

One CEO tells me over drinks that behaviour is simply a matter of incentives. Another that we are moving slowly towards another ice age and global warming is merely a blip in the process.

Others are more energised. It is great to have representation from one of the sovereign wealth funds. Our next project is to look at the future of ownership, and my conversation here confirms my view that some sovereign wealth funds have the capacity to be long term owners. Take Temasek, one of the sovereign wealth funds based in Singapore. Rather like 3i in the UK, Temasek, which is responsible for investing billions of Singapore's growing reserves not only promotes learning about how to be a good investor among its own people who have to act as owners or part owners of companies all over the world. It also shares its knowledge about good governance with its investee companies, creating a community of learning among them. So are these the sovereign wealth funds that the Americans suggested at Davos were a threat to free markets? As usual the point is that it is dangerous to generalise about the effects of any one type of ownership.

Ian's introduction and my speech are well received, but there are the occasional barbs. Is this whole interest in sustainability the result of a couple of centuries' guilt by western companies? Over dinner someone mentions the East India Company, someone else the folly of the Americans trying to export democracy to Iraq. No one quite says it in so many words, but among some guests there is an undertone of  "why should we listen to you?"

On the other hand there are some who feel the message is urgently needed.

Three years ago, explains one guest, people would have thought you were from Mars. Today they are waking up to the changes and need outside voices like this to explain why it is important for businesses to re-examine the way they do business. There is a particularly fascinating story of Intel in Vietnam, where the company initiated and signed a memorandum of understanding with the government that they would both fight corruption, and report any examples they found. The MD said simply that bribery cost him 7% a year in costs and this would save money: also that it sent a message to the employees and potential employees about the kind of company they wanted to be.

One sophisticated guest from the investment world entirely understands the arguments and asks about whether we see the different capitalisms (Confucian, western etc) converging or staying different. Again there is interest in considering how a group of Asian business leaders would have written the report. 

A PS about coincidences. I sit next to CB Choo, Chairman and CEO Keppel Offshore & Marine. I ask him about how he started. It turns out he studied Naval Architecture at Newcastle. I mention that my daughter is at university in Newcastle there and that my mother was brought up on a farm at nearby Alnwick. He then recalls that it was to that same farm that my uncle, Charles Bosanquet, invited him and two other foreign students to Christmas lunch in 1978 and a post lunch tour of the farm and estate.  

Then we find that Danny Teoh, the KPMG Singapore Managing Partner sitting on the other side of CB Choo, was at the Newcastle Poly doing accounting at exactly the same time. Four of us at the table and only one of us with no Geordie connection!

Hong Kong

Brilliant fast train from new airport to town...permanent cloud/smog masking the hills ..and concern everywhere that the talented are starting to shun Hong Kong because of the impaired environment.

As an example of the consequence of business acting with blinkers and not expanding the space, try this: Hong Kong wants to turn itself into a knowledge high value added economy. It outsourcers the manufacturing. Manufacturing expands in the Pearl River Valley on the Chinese mainland, so does the pollution which comes over here and drives away the knowledge workers....

Also most of its water is supplied from the Chinese mainland and trading of water permits is coming.

Air pollution from vehicles and coal combustion is estimated to have killed 500,000 Chinese in 2003.

I used these examples tonight in my presentation. Guests included people from private equity, from the world of business schools and universities, from community involvement organizations, from major Chinese family trading companies and other large private businesses.

One of the guests, a senior figure in a major transport group, and apparently a great sceptic on these issues, asked me how I defined stakeholders. I explained I did not like the term and preferred to talk about key relationships. "Stakeholders" is about what people think the company owes them. "Key relationships" is about which relationships are material to the success of the business. He said he liked that and would start to use the term in future.

Sitting next to me afterwards was a family businessman who owns property companies around the world. He too was sceptical and kept on saying that he did Corporate Social Responsibility (CSR) but it imposes costs. I said it's not really about CSR because a lot of CSR is tokenism. The heart of the matter is values. He is also a non-executive director of one major services business with a strong Asian presence and commented that that business stopped doing well about the same time it adopted CSR policies. In further discussion he said of course the real problem is that they took over an American business which took them away from their traditional core. Wasn't that a case of business losing out when it forgot its core values, I asked....yes he thought he agreed it probably was!

 “I met this guy who had worked out that what we really need is world government. He argued that the only way we are going tackle climate change and similar problems is by electing a global government with the mandate to do so. “

I thought back to what I had read that day in the newspapers. There was the news of the final British Airways flight out of Zimbabwe. “I liked flying BA” said one sad Zimbabwean: at least there was toilet paper on the plane, unlike Air Zimbabwe. But the combination of fuel unavailability and rampant inflation under the (elected) government of Robert Mugabe had put an end to that.

An unfair example perhaps? We do things so much better back in Britain.

Back to the newspapers. Another government IT project had gone wrong in the UK. The archives of the family record offices which were due to be on-line this year are at least 12 months behind schedule. But that has not stopped the people who run the office removing all the hard copy archives from their shelves, leaving researchers into family history either reliant on occasionally accessible micro-fiches.

What a curious idea of accountability the civil servants and ministers have demonstrated.

What about America?  I just heard on the radio about the curious case of the fake FEMA press conference, as US government officials, anxious to avoid the impression that the California fires had been handled as badly as hurricane Katrina, arranged what purported to be a press conference at such short notice that most of the questions to the officials were asked by – you guessed it - their own colleagues whose questions were, how shall we put it, lacking in challenge.

We have a long way to go to introduce into government the kind of accountability that the global marketplace takes for granted. Why people imagine that any superstructure as elaborate and remote as a global government would be free of these flaws, I cannot imagine. 

The market is not perfect. Far from it. But the market, underpinned in 90% of the world by the free media, imposes disciplines that make events like this less likely.

This leaves us back where we were, with what the social scientists call a collective action problem.

Most of us, it would appear, want to see solutions to climate change, although interestingly according to a recent HSBC poll (insert reference) the Indians, Brazilians, Chinese and Mexicans see this as being a lot more urgent than the British or the Americans.

Businesses need to act and they are – but they need the fiscal frameworks, from a new Kyoto downwards. . Governments need to act, and they are – but they need the support of voters. Investors need to act – and they are, but they need governments and consumers to make it pay and they need more mandates from savers.

We all depend on each other. We all need to play a concerted part in putting together the coalitions and the new sets of rules and practices that gives us some hope of stabilising carbon emissions below 450 ppm.

Al Gore described the problem with eloquence. Now we need to describe the solution with the same power, by telling story after story of successful combinations and coalitions.

In ‘Tomorrow’s Global Company – challenges and choices’ we tell a few of these stories. Our new website – to be launched shortly – will tell many more. Stuart Hart in his recently republished book ‘Capitalism at the Crossroads’ is an excellent source – the account in the first edition of SC Johnson and pyrethrum growers of Kenya is a classic. Read the practical examples of businesses, ngos, and governments working together towards a common goal – and be inspired by what we can do!

It was a good party. We toasted the first independent decade of work by Tomorrow’s Company. One individual remembered was Dick Onians - a venture capitalist of rare imagination. He raised money from those with private wealth and he invested it in fledgling technology businesses to create and grow those with a big future.

But the talk later was of a different style of investment altogether. Private equity deals are getting bigger. Any quoted company, whatever its size, is becoming a target. Just look at Blackstone’s £19.7bn buy-out of Equity Office Properties.  Depending on who they are and what they are buying these private equity groups offer a package that lies somewhere between turnaround, re-engineering, managing for cash, and asset stripping.

When I meet experts on private equity, they tell me not to worry. It will only get a return if the underlying business proposition is sound. People running businesses on sound principles have nothing to fear. Private equity brings to bear an important discipline: the need for an exit concentrates the minds of managers.

I certainly celebrate the richness of capitalism, the creative destruction that goes with investment and the ultimate test of the market as the judge of your contribution.

But have we got the balance right? This concern was aired by Sir Stuart Hampson the retiring Chairman of John Lewis in a recent piece in the FT:

“The private equity funds have undoubtedly shown how money can be released and companies can be restructured, but large question marks still hang over whether such restructuring is a recipe for long-term survival.”

I suggest that the first thing we need from the private equity industry is transparency. Let them say what interest they have in the underlying business for which they are bidding. What is their typical timetable? Do they intend to behave like owners? How does a private equity company with finite ownership horizon see its contribution to climate change? Is it factoring carbon efficiency into the slide rule that it runs over its targets?

 Did you hear the critic on the UK’s Today programme who said that Arnold Swarzenegger is trying to turn California into a third world country. He argued that California already has the highest energy prices in the USA before these changes: therefore the only effect would be to increase costs for business.  

It is surprising how some evangelists of the market have so little faith in the market. Does he really think that businesses and consumers will just ignore price signals ?

To me one of the most remarkable and powerful features of business is its power to adapt and to improvise. The history of capitalism is a history of adaptation.

Last week, together with Business in the Community and the Cambridge programme for Industry, Tomorrow’s Company hosted a unique event that built upon the success of our annual lecture. It was a pre-release screening of “The Inconvenient Truth”, Al gore’s remarkable film based on his presentation, which he has given a thousand times around the world now. In the audience were not simply leaders from the businesses who belong to our three organisations, but also their sons and daughter and nephews and nieces, including at least one nine-year olds who was writing up the occasion for a school magazine.

The CPI* are now going to train 1000 ambassadors, whom Al gore will train to deliver versions of this presentation.

I met people from Unipart, longstanding foundation members of Tomorrow’s Company, who described the steps they were taking across the business from company car to energy saving measures to act on the messages from Al Gore.

I had one question for the coming generation who made up a third of the audience and included representatives of the UK Youth Parliament. Who do you think are the agents of change in all this? Companies can do their bit. As consumers we do our bit. But what about the vital role of government? And – if we do agree that government can play a decisive part, what about political pressure so that no party dares to face the electorate without a programme at least as committed as Arnold Swarzenegger’s.

Many young people I speak to are still not sure whether it is worth voting. I appealed to them then to reconsider. Too many believe they can make no difference. One said “it’s big business doing all the polluting….our efforts won’t count for much”

That’s scarcity thinking. We need an abundance mentality. The truth is that their Get them to see “An inconvenient Truth”. All of us who care about the planet can make a difference.

The 2006 Accountability Rating list for Fortune magazine was recently launched and no doubt had PR departments in major corporations eagerly scrolling down the table to see how they rated in comparison to their business peers. But before the handshakes and backslapping, a fundamental question needs to be asked: do these lists achieve a meaningful purpose or are they simply a form of beauty pageant for the usual suspect organisations?

The point was made recently by the writer/journalist, David Vigar in our recent report from the Wilton Park conference that all too often the debate surrounding the social role of organisations is confined to a narrow band of academics, think-tanks, consultancies and a selected few members of the business community. Anyone who attends a handful of conferences devoted to CSR realises that it is consistently the same faces they see. The wider public who are often referenced as having widespread mistrust of organisations are absent from the debate.

New lists and indices that are emerging at an increasing rate are doing little to address this disconnect. The methodologies employed are often complex and confusing which is hardly surprising considering that there are virtually no universal agreed upon tools by which to quantify the social/sustainability data being analysed. In addition, nearly every list draws is component companies from sources that practically guarantee that the list will be dominated by major US multinationals and perhaps a few global multinationals. This despite the fact that more than 55% of UK employees alone work in small to medium sized companies!

This creates a problem for companies since much of the current motivation for their increasing social profile has been an attempt to close the perceived gap between their operations and the wider community and stakeholders they serve.   

While the current efforts to try and develop methods of comparability on social/sustainable performance are laudable, they won’t close this gap. For this to happen, companies need to be open about their mistakes, relate their issues to lives of ordinary people and push back at consumers and critics in a way that makes them address the uncomfortable truths about their own behaviours.

The rapprochement process would begin if there were a focus on values. Namely, what are the values that underpin the way a company does its business? And to what extent does a company live these values?

These questions are very difficult to answer within a standardised research framework. But understanding how an organisation embodies its values is a more powerful tool for engaging the wider stakeholder audience because it presents us with fundamentals that every human can relate to. Every mature human has a set of values that it uses as a moral compass to navigate through life’s ethical minefields. By articulating its values, a company can demonstrate its humanity and challenge individuals both inside and outside the organisation to recognise the difficulty in reconciling everyday actions with a core set of principles.