Private Equity vs. PLC Boards: A Comparison of Practices and Effectiveness - Summary of Research Findings

24 Pages Posted: 18 Feb 2009

See all articles by Viral V. Acharya

Viral V. Acharya

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

Conor Kehoe

McKinsey & Company, Inc.

Michael Reyner

MWM Consulting

Date Written: January 2009

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.

Suggested Citation

Acharya, Viral V. and Kehoe, Conor and Reyner, Michael, Private Equity vs. PLC Boards: A Comparison of Practices and Effectiveness - Summary of Research Findings (January 2009). CEPR Discussion Paper No. DP7148, Available at SSRN: https://ssrn.com/abstract=1345674

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

New York University (NYU) - Department of Finance

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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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