More risk means more reward say PE chairmen

An increasing number of chairmen and non-executive directors (NEDs) of private equity firms are taking a more active role in management teams, new research shows.

Findings from management consultancy business Tyler Mangan and Clearwater Corporate Finance reveal that 56 per cent of chairmen and NEDs are adopting a wider range of responsibilities, with roles becoming increasingly sophisticated.

The survey shows that, on the back of the change in the economic climate, chairmen now have a greater responsibility and are more actively involved with management teams in the decision-making process, leading to a feeling of greater exposure to risk.

This is prompting chairmen and NEDs to suggest a rethink on compensation mechanisms and levels.

Some 53 per cent say that businesses are performing in line or above expectations and 93 per cent have some or full flexibility to make changes to management compensation.

Jana Kilmecki, director and co-founder of Tyler Mangan, comments, ‘Chairmen and NEDs are now working with management teams far more closely than before the downturn.

‘Greater responsibility leaves them more exposed to risk and the survey results suggest that remuneration for chairmen and NEDs, as well as management teams, should reflect this.’

Marc Gillespie, partner at Clearwater Corporate Finance, says the results provide a ‘great deal of food for thought’.

‘The role of today’s chairman has changed and needs to be more closely involved with investee companies.’

The survey questioned chairmen and NEDs with a collective 300 years of private equity experience from firms such as Apax, Advent, ECI, Gresham and LDC.

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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Non-executive directors