How Private Equity Can Drive Boardroom Diversity
Corporate boards are vital in helping companies maintain a longer-term focus while executing on shorter-term priorities. And a board’s unique stature, sitting atop the organization, allows it to shape corporate culture while guiding long-term strategy through a mix of encouragement, skepticism, and guidance. This role is consistent regardless of the ownership structure of the company—be it publicly held or privately controlled.
In 2018 FCLTGlobal embarked on in-depth research to identify the long-term habits of highly effective corporate boards. [1] We found four characteristics consistent across successful public companies:
- they spend more time on strategy;
- they ensure that directors have a stake in the long-term success of the company, often by encouraging board members to hold company stock through and beyond their tenure;
- they communicate directly with long-term shareholders; and
- they have a diverse board to bring differing perspectives and backgrounds for the benefit of the company.
Portfolio companies controlled by private equity firms have a unique structure. Their boards typically include representatives of the controlling private equity firm or firms; management of the company; outside/ independent directors (who may not be independent under the public company definition); and sometimes representatives of the limited partners, with either voting or observer status.
