Corporate Governance and Responsible Investment in Private Equity (2021) by Simon Witney offers a unique exploration of corporate governance and responsible investment in the private equity sector. Witney, a visiting professor in practice at the London School of Economics and Political Science, draws on his extensive experience as a private equity lawyer to shed light on the workings of corporate governance and its relationship with responsible investment in this dynamic investment class.
Key Points:
- Private equity is a rapidly growing investment class, surpassing publicly listed companies in terms of growth.
- Corporate governance in private equity refers to the rules that govern decision-making processes and the interests served in private equity-backed companies.
- Private equity firms emphasize accountability, transparency, and adoption of best practices by their portfolio companies.
- Bespoke contracts play a crucial role in determining the governance mechanisms in private equity-backed companies, aligning interests and enhancing oversight.
- Active governance is crucial in the private equity space to counter misperceptions and criticism.
- The Companies Act of 2006 in the United Kingdom defines the default regulations for corporate governance, but private equity-backed companies often operate under contractual agreements.
- The Wates Principles provide high-level principles for corporate governance in large private companies that can be scaled for smaller companies.
- Academic studies indicate that private equity-backed portfolio companies outperform listed counterparts in terms of profitability, productivity, employment, and working capital management.
- This comprehensive book addresses questions regarding effective governance and responsible investment in private equity and provides justification for confidence in this investment class.
In this book, Witney addresses the importance of corporate governance in private equity and its relationship with responsible investment. He dispels misperceptions about private equity operators and highlights the benefits of active governance in this asset class.
Witney delves into the regulatory landscape in the United Kingdom and explores the Companies Act of 2006, European competition law, and directives such as the Alternative Investment Fund Managers Directive. He also discusses the influential Walker Guidelines and the Wates Principles, which provide a model for effective governance and monitoring in large private companies.
The book concludes with an examination of the impact of corporate governance on corporate performance. While academic studies suggest that private equity-backed companies outperform their listed counterparts in various metrics, Witney acknowledges the need for updated research in this area.
This comprehensive text is a valuable resource for regulators, company management, and investors seeking insights into effective governance and responsible investment in private equity. It also raises questions about the governance and regulatory frameworks in different countries and their impact on private equity.
Ultimately, Corporate Governance and Responsible Investment in Private Equity offers a compelling examination of the vital role of governance in private equity and how it contributes to responsible investment practices.
