Private equity chairmen and NEDs no longer taking a back seat role

Dato

Survey suggests that 56% of chairmen and NEDs have taken on a wider range of responsibilities within management teams, and that their role is increasingly sophisticated.

Chairmen of private equity firms find themselves increasingly involved in management issues due the economic climate, and many believe they are more exposed to risk as a result, according to a recent discussion forum.

Specialist management consultancy Tyler Mangan and leading corporate finance advisory firm Clearwater Corporate Finance hosted the forum for private equity chairmen and NEDs to consider how their roles had changed as a result of the economic climate.

Among other points raised, it was agreed that chairmen now have greater responsibility and are now more actively involved with management teams in the decision making process. In addition it was suggested that chairmen now need to ‘reset the clock’ and initiate difficult conversations, working with management teams to revise business plans and KPIs.

The forum explored points raised in a survey of chairmen and NEDs from a range of private equity firms, including Apax, Advent, ECI, Gresham and LDC. Those who completed the survey have collectively served 300 years in private equity backed businesses and are currently involved in around 90 deals.

Because of the increased involvement in management decisions and greater potential risk, chairmen and NEDs suggested that remuneration packages should reflect this position. There was also a view that it may be necessary to rethink compensation mechanisms and levels in current times. Other key findings from the survey include:

  • 53% of businesses are performing in line or above expectations
  • 93% of respondents have some or full flexibility to make changes to management compensation

Jana Klimecki, director and co-founder of Tyler Mangan said: “Chairmen and NEDs are now working with management teams far more closely than before the downturn. Greater responsibility leaves them more exposed to risk and the survey results suggest that remuneration for chairmen and NEDs as well as management teams should reflect this.”

Marc Gillespie, partner at Clearwater Corporate Finance said: “Both the survey and forum provided a great deal of food for thought, with a wide cross section of views and experience on an increasingly important topic. The role of today’s chairman has changed and needs to be more closely involved with investee companies.”

Read the survey output in full here.