Serving on a Private Equity Board: Risks, Rewards, and Realities
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NACD Northern California
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Lisa Spivey,
Executive Director
Kate Azima,
Director of Partnerships & Marketing
programs@northerncalifornia.nacdonline.org
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About The Event
Whether you're currently serving on a private equity (PE) board or exploring the opportunity, understanding the distinct challenges and opportunities of PE-backed boards is essential in today’s evolving corporate landscape. In a candid panel discussion, our speakers shared their insights into the risks, rewards, and realities of serving on a PE-backed board.
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KEY TAKEAWAYS
Understand the Unique Roles on Private Equity-Backed Boards
- PE-backed boards typically include investment partners, operating partners (often full-time roles), independent directors, sometimes executive chairs, and often the CEO of the PE-backed company.
- Roles vary by fund size and investment strategy—some are deeply operational, while others are more strategic.
- Unlike public boards, most PE-backed boards demand more active involvement, including hands-on support for go-to-market strategy, operations, executive mentoring, and search professionals.
Expect a Different Governance Dynamic
- PE-backed boards are often controller-led, meaning decisions are influenced by the majority ownership of the sponsor.
- Directors are expected to provide strategic guidance, act as sounding boards, and coach C-suite executives, often in real time.
- The relationship with the CEO is often closer and more dynamic—board members may be arbitrators between sponsor and management.
- If you had a specific area of focus in your operational role (e.g., chief revenue officer, chief marketing officer, or chief financial officer), you may be tapped for that experience, particularly when there are new company hires that need mentorship.
Evolving Legal Risks and Independence Requirements
- PE board seats are limited, as most are reserved for sponsor designees (deal team members or employees of the PE firm); typically, only one or two seats are allocated to an independent director or industry expert, making the fit and value-add of that individual especially important.
- Recent Delaware law changes (SB21) require at least two truly independent directors to validate certain conflicted transactions.
- Independence is judged by your financial ties to the sponsor and whether you receive carry or equity.
- Ensure you are covered by adequate directors and officers insurance and an indemnity agreement, particularly if you may be involved in approving related-party or conflict transactions.
Crisis Preparedness and Active Problem Solving Are Critical
- Boards should review crisis plans, integrate legal and cybersecurity considerations, and proactively assist management in navigating uncertainty.
- Use insights across the PE portfolio to identify best practices and opportunities during crises, such as acquisition strategies or product shifts.
Opportunities amid Volatility
- Turbulent markets can offer mergers and acquisitions, restructuring, and spinout opportunities, particularly in sectors like software, cybersecurity, and artificial intelligence.
- PE directors can help companies take calculated risks and capitalize on market dislocations while staying attuned to changes in buyer behavior and capital flow.
- Leverage your sector knowledge to identify where your expertise aligns with value creation.
Entry into PE Boards
- Ask yourself what your goals are, how active and engaged you want to be, and how much of a time investment you can commit to when considering a PE-backed board.
- Building relationships with PE firms, CEOs, and operating partners is key—your network matters. Serving as a senior advisor or diligence advisor can often lead to relationships where you are asked to join the board.
- Lead with your operational expertise or strategic value.
- Co-investment is not typically required to join a PE-backed board, but there are often opportunities to invest.
Questions Before Adding a PE-Backed Board to Your Portfolio
- How involved do I want to be? What are the roles available, and where do I fit?
- How do I ensure my independence and manage potential conflicts of interest?
- Does the PE company have the resources and operational support to back the portfolio company in times of crisis?
- What value can I uniquely contribute to help this company thrive, especially in uncertain market conditions?
- Have I reviewed the D&O insurance coverage and my legal exposure related to board service?
SPEAKERS
Mallory Brown
Alex Kaufman
Bethany Mayer
Michael Sabbatis
MODERATOR
Steve Osborn
Thank you to our generous partner for making this event possible.
NACD Northern California
Contact Us
Lisa Spivey,
Executive Director
Kate Azima,
Director of Partnerships & Marketing
programs@northerncalifornia.nacdonline.org
Find a Chapter
| NACD and the NACD Chapter Network organizations (NACD) are non-partisan, nonprofit organizations dedicated to providing directors with the opportunity to discuss timely governance oversight practices. The views of the speakers and audience are their own and do not necessarily reflect the views of NACD. |