Governance and board performance at private equity-backed companies represent uncharted territory. A recent Capital Value survey of companies that are funded by various investors--buy-out, venture capital and angel investors--found that 80 percent of the boards do not evaluate their own activities. Formal investor groups emphasize deal screening and proprietary deal flow to distinguish themselves, and are often unaware of board dynamics that can turn a deal into a success or dismal failure.
While many individual directors from private equity (PE) firms are top-caliber, all PE firms should have policies directing steady attention to board performance. This change could be stimulated by funds' limited partners. Following are additional suggestions distilled from the survey and the author's board experience that can help improve board performance.
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