{"id":4534,"date":"2025-08-07T09:25:47","date_gmt":"2025-08-07T02:25:47","guid":{"rendered":"https:\/\/gunungcapital.com\/?p=4534"},"modified":"2025-08-07T09:26:49","modified_gmt":"2025-08-07T02:26:49","slug":"redefining-governance-why-public-boards-must-learn-from-private-equity","status":"publish","type":"post","link":"https:\/\/gunungcapital.com\/zh\/redefining-governance-why-public-boards-must-learn-from-private-equity\/","title":{"rendered":"Redefining Governance: Why Public Boards Must Learn from Private Equity"},"content":{"rendered":"<div data-elementor-type=\"wp-post\" data-elementor-id=\"4534\" class=\"elementor elementor-4534\" data-elementor-post-type=\"post\">\n\t\t\t\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-9a033ae elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"9a033ae\" data-element_type=\"section\" data-settings=\"{&quot;jet_parallax_layout_list&quot;:[]}\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-793e8b5\" data-id=\"793e8b5\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t\t\t<div class=\"elementor-element elementor-element-c06e82d elementor-widget elementor-widget-text-editor\" data-id=\"c06e82d\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<style>\/*! elementor - v3.16.0 - 14-09-2023 *\/\n.elementor-widget-text-editor.elementor-drop-cap-view-stacked .elementor-drop-cap{background-color:#69727d;color:#fff}.elementor-widget-text-editor.elementor-drop-cap-view-framed .elementor-drop-cap{color:#69727d;border:3px solid;background-color:transparent}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap{margin-top:8px}.elementor-widget-text-editor:not(.elementor-drop-cap-view-default) .elementor-drop-cap-letter{width:1em;height:1em}.elementor-widget-text-editor .elementor-drop-cap{float:left;text-align:center;line-height:1;font-size:50px}.elementor-widget-text-editor .elementor-drop-cap-letter{display:inline-block}<\/style>\t\t\t\t<p><span style=\"font-weight: 400;\">In 2025, the world of corporate governance is at a turning point.<\/span><\/p><p><span style=\"font-weight: 400;\">Public-company boards, long shaped by risk management, regulatory compliance, and quarterly disclosures are facing structural pressure to do more than just oversee. They must now guide transformation, unlock long-term value, and navigate systemic disruption, from digital shifts to sustainability mandates.<\/span><\/p><p><span style=\"font-weight: 400;\">At Gunung Capital, we have observed how some of the most resilient, high-performing boards are not in public firms at all but in private equity (PE)-backed companies. These boards behave differently such as they are smaller, more focused, and unrelentingly tied to outcomes. They do not just review strategy, they shape it. They don\u2019t just monitor performance, they drive it.<\/span><\/p><p><span style=\"font-weight: 400;\">A recent <\/span><a href=\"https:\/\/www.mckinsey.com\/capabilities\/strategy-and-corporate-finance\/our-insights\/how-public-company-boards-can-thrive-by-adopting-private-equity-practices?stcr=E494A6D2019B44F48BEB79C6AF298252&amp;cid=mgp_opr-eml-alt-msc-mgp-glb--&amp;hlkid=ce03747a7035403d8765704c2fad38a3&amp;hctky=14277103&amp;hdpid=06760558-e39c-4fed-80bf-01b1723a3555\" rel=\"nofollow noopener\" target=\"_blank\"><span style=\"font-weight: 400;\">McKinsey &amp; Company article <\/span><i><span style=\"font-weight: 400;\">\u201cHow public-company boards can thrive by adopting private equity practices\u201d<\/span><\/i><\/a><span style=\"font-weight: 400;\">, crystallizes this contrast. Based on interviews with over 200 directors globally, the study outlines seven board practices that distinguish PE-led governance. For public and family-owned companies aiming to evolve, these practices offer both inspiration and a roadmap but applying them in the real world comes with meaningful trade-offs.<\/span><\/p><p><span style=\"font-weight: 400;\">This article will explore how these practices unfold across our investment ecosystem, where they work, where they clash with reality, and how leaders can navigate the tension.<\/span><\/p><p>\u00a0<\/p><h2><b>1. Shift from Oversight to Value Ownership<\/b><\/h2><p><b>What PE does well:<\/b><span style=\"font-weight: 400;\"> PE boards spend up to 21% more time on strategy than public boards and nearly half of PE directors report a \u201cvery high\u201d impact on company performance, compared to just 11% in public boards, as noted by McKinsey &amp; Company.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> In public or family businesses, this shift means treating the boardroom as a performance accelerator, not just a compliance forum. Directors must deeply understand the value-creation levers: growth, margins, capital efficiency, and transformation pathways.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> Many public boards are constrained by legacy norms, where independence is prized more than insight, and strategic issues are diluted across bloated agendas. The shift requires not just structural change but cultural recalibration.<\/span><\/p><p><span style=\"font-weight: 400;\">The transformation playbooks encourage portfolio companies to develop a \u201cBoard Strategy Deck\u201d refreshed quarterly that sits apart from routine reporting and drives active board debate. It is not about more slides. It is about sharper questions.<\/span><\/p><p>\u00a0<\/p><h2><b>2. Rethink Board Composition and Time Commitment<\/b><\/h2><p><b>What PE gets right:<\/b><span style=\"font-weight: 400;\"> PE boards are small, often just 6\u20138 directors and filled with people who were involved pre-deal. They know the business. They are invested in the outcome. They are not there for prestige; they\u2019re there to drive change.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> Public boards can adopt similar principles by reducing symbolic or politically influenced appointments and emphasizing sectoral and operational relevance. In Asia, this is especially important where boardrooms are still evolving beyond legacy affiliations.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> Board reduction is easier said than done. Family dynamics, regulatory requirements, or government-linked ownership can limit flexibility. There is also the real issue of <\/span><b>time<\/b><span style=\"font-weight: 400;\">: most public board members hold multiple seats but few are willing to commit PE-level hours per company.<\/span><\/p><p><span style=\"font-weight: 400;\">It also encourages hybrid governance models, blending statutory boards with <\/span><b>Value Creation Committees (VCCs)<\/b><span style=\"font-weight: 400;\"> that include transformation advisors or ex-operators who can be deeply engaged without affecting board independence.<\/span><\/p><p>\u00a0<\/p><h2><b>3. Anchor Every Discussion to a Value-Creation Bridge<\/b><\/h2><p><b>McKinsey\u2019s recommendation:<\/b><span style=\"font-weight: 400;\"> PE boards use a simple but powerful tool: a \u201cvalue-creation bridge\u201d that links today\u2019s business to tomorrow\u2019s ambitions through specific levers, cost, pricing, efficiency, capex, etc.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> This is one of the most implementable changes for public boards. Replace scattered strategic conversations with a focused, visual roadmap updated quarterly and tie board meetings to progress against it.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> Many management teams are trained to present not to debate. Shifting to bridge-based decision-making requires a new cadence of interaction, a willingness to surface uncomfortable truths, and directors confident enough to challenge.<\/span><\/p><p><span style=\"font-weight: 400;\">In our experience, companies that adopt value-creation bridges tend to <\/span><b>build stronger alignment<\/b><span style=\"font-weight: 400;\"> between the CEO, board, and investors. It creates clarity. But it also demands courage especially when progress stalls.<\/span><\/p><p>\u00a0<\/p><h2><b>4. Fix the Incentives: Align Compensation with Outcomes<\/b><\/h2><p><b>What PE models show:<\/b><span style=\"font-weight: 400;\"> Directors and management in PE firms often have skin in the game. Long-term value is rewarded. Underperformance is penalized. Incentives are not symbolic, they are strategic.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> Public and family firms can introduce smarter compensation structures. That could mean more performance-based equity (with multi-year targets), clawback clauses, or board fees partially tied to transformation milestones.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> Governance codes in many jurisdictions, especially in Asia still discourage equity-linked compensation for directors, citing independence concerns. There\u2019s also cultural reluctance: in family firms, tying incentives to formal KPIs can feel transactional, even adversarial.<\/span><\/p><p><span style=\"font-weight: 400;\">Works with boards to redesign incentive structures, balancing Western models with <\/span><b>local cultural nuance is crucial<\/b><span style=\"font-weight: 400;\">. In our view, it is less about copying PE schemes and more about asking: <\/span><i><span style=\"font-weight: 400;\">\u201cWhat behavior are we rewarding and is it aligned with long-term strategy?\u201d<\/span><\/i><\/p><p>\u00a0<\/p><h2><b>5. Get Outside the Boardroom<\/b><\/h2><p><b>PE directors do the work:<\/b><span style=\"font-weight: 400;\"> They walk the floors. They talk to plant managers. They visit warehouses. McKinsey data shows they spend significantly more time with stakeholders than public directors, especially with management, employees, and customers.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> Immersion builds trust and insight. Public directors who engage outside formal meetings often uncover disconnects that would otherwise go unnoticed and build stronger alignment with the leadership team.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> Time and optics. Public directors, particularly in regulated environments are wary of crossing into operational lanes. Management can also feel threatened if engagement feels like inspection.<\/span><\/p><p><span style=\"font-weight: 400;\">One principle we apply at Gunung Capital, <\/span><b>\u201cengage to understand, not to evaluate.\u201d<\/b><span style=\"font-weight: 400;\"> We have found that when directors participate in warehouse walkthroughs, team huddles, or project reviews purely to listen and learn, it de-risks transformation and often energizes frontline teams.<\/span><\/p><p>\u00a0<\/p><h2><b>6. Prepare for Leadership Transitions, Early<\/b><\/h2><p><b>PE\u2019s post-deal rigor:<\/b><span style=\"font-weight: 400;\"> In the first 90 days, PE investors rigorously assess the leadership bench\u00a0 and are not shy about replacing or upgrading.<\/span><\/p><p><b>Opportunity:<\/b><span style=\"font-weight: 400;\"> Succession planning shouldn\u2019t be a box-ticking exercise. Public boards can emulate PE by building a live CEO pipeline, conducting annual emergency succession simulations, and being more honest about team capability gaps.<\/span><\/p><p><b>Challenge:<\/b><span style=\"font-weight: 400;\"> In family businesses or GLCs, leadership changes are politically or emotionally fraught. There\u2019s also a broader hesitation to talk about succession unless it&#8217;s imminent which leads to reactive, not strategic, transitions.<\/span><\/p><p>\u00a0<\/p><h2><b>Conclusion: Don\u2019t Copy PE. Learn from It.<\/b><\/h2><p><span style=\"font-weight: 400;\">The lesson from McKinsey\u2019s 2025 research is clear, PE boards outperform because they are designed for focus, accountability, and action. But transplanting their practices into public boards isn\u2019t a plug-and-play exercise.<\/span><\/p><p><span style=\"font-weight: 400;\">It requires adaptation. It demands self-awareness. And it works best when paired with a clear transformation agenda, not just governance reform for its own sake.<\/span><\/p><p><span style=\"font-weight: 400;\">At Gunung Capital, we see this convergence between PE discipline and public governance as a defining theme for the next decade. Whether through active investment, strategic advisory, or transformation oversight, we are committed to building boards that are not just stewards of capital, but stewards of change.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"<p>In 2025, the world of corporate governance is at a turning point. Public-company boards, long shaped by risk management, regulatory compliance, and quarterly disclosures are facing structural pressure to do more than just oversee. They must now guide transformation, unlock long-term value, and navigate systemic disruption, from digital shifts to sustainability mandates. At Gunung Capital, [&hellip;]<\/p>","protected":false},"author":1,"featured_media":4536,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"_links":{"self":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/4534"}],"collection":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/comments?post=4534"}],"version-history":[{"count":26,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/4534\/revisions"}],"predecessor-version":[{"id":4561,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/posts\/4534\/revisions\/4561"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media\/4536"}],"wp:attachment":[{"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/media?parent=4534"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/categories?post=4534"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gunungcapital.com\/zh\/wp-json\/wp\/v2\/tags?post=4534"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}