Private Equity vs PLC Boards in the U.K.: A Comparison of Practices and Effectiveness

Private Equity vs PLC Boards in the U.K.: A Comparison of Practices and Effectiveness

Viral Acharya, Conor Kehoe, Michael Reyner

Series number :

Serial Number: 
233/2009

Date posted :

August 01 2008

Last revised :

SSRN Share

Keywords

  • Corporate governance • 
  • Leveraged buyouts (LBO) • 
  • management buyouts(MBO) • 
  • active ownership

We interview 20 executives in the UK who have been members of both PE and PLC boards of relatively large companies. The main difference we find in PE and PLC board modus operandi is in the single-minded value creation focus of PE boards versus governance compliance and risk management focus of PLC boards.

PE boards see their role as "leading" the strategy of the firm through intense engagement with top management; in contrast, PLC boards "accompany" the strategy of top management. PE boards report almost complete alignment in objectives between executive and non-executive directors, whereas the PLC boards report lack of complete alignment and focus on management of broader stakeholder interests. Finally, PE board members receive information that is primarily cash-focused and undergo an intensive induction during the due diligence phase. In contrast, PLC board members collect more diverse information and undergo a more structured (formal) rather than an intense induction.

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Authors

Professor
Real name:
Viral Acharya
Fellow, Research Member
Leonard N. Stern School of Business, New York University
Real name:
Conor Kehoe
Real name:
Michael Reyner