Private Equity vs. PLC Boards in the U.K.: A Comparison of Practices and Effectiveness

25 Pages Posted: 8 Jan 2009 Last revised: 30 Mar 2009

See all articles by Viral V. Acharya

Viral V. Acharya

New York University - Leonard N. Stern School of Business; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); New York University (NYU) - Department of Finance

Conor Kehoe

McKinsey & Company, Inc.

Michael Reyner

MWM Consulting

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2008

Abstract

We interview 20 executives in the UK who have been members of both PE and PLC boards of relatively large companies. The main difference we find in PE and PLC board modus operandi is in the single-minded value creation focus of PE boards versus governance compliance and risk management focus of PLC boards. PE boards see their role as "leading" the strategy of the firm through intense engagement with top management; in contrast, PLC boards "accompany" the strategy of top management. PE boards report almost complete alignment in objectives between executive and non-executive directors, whereas the PLC boards report lack of complete alignment and focus on management of broader stakeholder interests. Finally, PE board members receive information that is primarily cash-focused and undergo an intensive induction during the due diligence phase. In contrast, PLC board members collect more diverse information and undergo a more structured (formal) rather than an intense induction.

Keywords: corporate governance, leveraged buyouts (LBO), management buyouts (MBO), active ownership

JEL Classification: G31, G32, G34, G23, G24

Suggested Citation

Acharya, Viral V. and Kehoe, Conor and Reyner, Michael, Private Equity vs. PLC Boards in the U.K.: A Comparison of Practices and Effectiveness (August 1, 2008). ECGI - Finance Working Paper No. 233/2009. Available at SSRN: https://ssrn.com/abstract=1324019 or http://dx.doi.org/10.2139/ssrn.1324019

Viral V. Acharya (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/vacharya/public_html/~vacharya.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

New York University (NYU) - Department of Finance

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Conor Kehoe

McKinsey & Company, Inc. ( email )

1 Jermyn Street
London, SW1Y 4UH
United Kingdom
+44 (0)20 7961 5988 (Phone)

Michael Reyner

MWM Consulting ( email )

12 Charles II Street
London, SW1Y 4QU
United Kingdom
+44 (0)20 7484 1050 (Phone)

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