Private vs Public – Boards & Accountability


There has been much debate and concern about quoted businesses slipping into the hands of Private Equity (PE). Does this lead to a major diminution in accountability and transparency? Will the public interest play second fiddle? And what are the implications for those sitting on the Board of PE portfolio companies.


Fidelio’s focus is “Building Better Boards” and while our origin and heritage is very much the public sector, over the past couple of years we have also worked more closely with Private Equity and the Boards of portfolio companies. There are many legitimate concerns about key assets slipping out of the public markets with the oversight that this brings but there are also examples of responsible ownership outside the listed sector which we explore in this Overture.


Private Equity ownership of business assets has been one of the major growth trends of the last decade, and one that shows little sign of abating. Record private market fundraising of $1.2 trillion was reported in 2021, as well as assets under management in the region $10 trillion. Market turbulence and geopolitics combined with higher interest rates may yet crimp some higher-leveraged deals, but it’s clear that PE will continue to be a highly important actor in the corporate markets.


The visibility and governance of assets held privately is a concern, amid fears that they may be subject to a lower level of scrutiny. Issues include the debt burden that may be placed on businesses to the detriment of other stakeholders, and also, in a world striving for Net Zero, that carbon-intensive assets assumed by Private Equity may be managed less responsibly.


But, while there are legitimate reasons for concern, across Fidelio’s Board Evaluation, Development and Search practices we are seeing evidence of a growing focus on ESG factors, including in the Private Equity ecosystem.


This has a number of important drivers. Having in many cases long operated “under the radar” and viewed corporate governance norms as something for the listed sector, leading PE firms are now becoming acutely aware of the increased scrutiny that comes with a higher profile. This stems not just from scale and the broader business environment, but crucially from the expectations of institutional investors, including pension funds: these are increasingly applying listed sector standards across their portfolios and in many cases subjecting PE investments to ESG screens.


Responsible Private Equity owners are beginning to conduct Board Evaluations and include ESG competences in their Board skill matrices in a way that has become standard good practice on listed Boards. Fidelio has been pleased to support with both.

Key governance themes that Fidelio is now also seeing in a Private Equity context include:

  • Board effectiveness, including understanding of stakeholder as well as shareholder expectations

  • The ability to oversee and promote Diversity, Equity and Inclusion across what is often a very varied and geographically diverse portfolio

  • An acute awareness of the environment both with regard to climate change and broader issues of bio-diversity, water and use of plastics

  • An accountability for the supply chain with regard to human rights issues and also the environmental footprint

  • Good governance as being important for current and future shareholders and therefore for valuation

Fidelio first commented on this important shift in governance among portfolio companies in 2021. To read the original Overture, please click here.