Governance Lessons from the Private Equity Industry

Abstract

The private equity industry has been instrumental in developing corporate governance standards in privately held companies and has been hugely successful in demonstrating that good corporate governance can be achieved by relying on management ownership, striving for value creation, measuring key financial indicators, rewarding high performance, advocating shareholder activism, performing due diligence, and taking calculated risk using a big lever. Public companies can adopt certain elements of this handson style of corporate governance from the private equity industry to strike a healthy balance between risk-taking and governance compliance in order to promote economic prosperity and technical innovation.