Are you ready to be a Private Equity NED?
Being a non-executive director (NED) is tremendously rewarding however regulatory requirements and the pace of change are also making the role increasingly challenging.
Although the core qualities that make an outstanding NED in the private and public spheres are similar, there are distinct differences in focus, and potential liabilities. The difference lies not just in the quality of the skill-sets and insights they require, but in the level of risk and reward that exists.
What differentiates a Private Equity NED?
A private equity (PE) NED needs to:
• Be intimate with how PE works, probably having experienced it as an executive or advisor
• Understand and be prepared for a role as an independent arbiter, sometimes standing between the management team and PE house
• Have an acute understanding of the company, the industry and key players that the business operates in
• Have strong influencing and decision making skills
• Possess coaching and mentoring skills
• Add to the strategy of the business, challenging the thinking and stretching the aspirations of the management team
• Be comfortable with accelerated change.
DO YOU POSSESS THESE SKILLS?
CAN YOU INFLUENCE?
WILL YOU BE ABLE TO STEER A HEADSTRONG CEO?
A good NED should be doing more than merely ticking the corporate governance and risk management boxes, irrespective of whether they are on the board of a listed or private equity-backed company. However, the NED of a private company is able to focus more exclusively on the strategy of the business along with the management and other shareholders.
A PE firm requires its NED to lead, in respect of strategic ideas, relevant contacts and initiatives. Having a deep understanding of the industry and key players will help in building trust with the management team, CEO and PE House and provides the opportunity to influence decision-making. The real contribution from a NED is in helping a company move forward by scrutinising and challenging decision making.
A successful NED appreciates that tough questions need to be asked. When problems and challenges arise, business leaders can be too close to the issue to view it objectively. The right NED will take an experienced and level-headed approach to overcoming an obstacle, often turning it into an opportunity.
NEDs can also bring additional credibility to a business – often playing a central role in advance of a transaction or investment. Private equity funds derive additional confidence from the involvement of a NED with a proven track record.