Around the world, corporate time horizons are shrinking. In such a context, boards play a critical role in steering companies toward long-term value creation – yet many independent directors have limited incentive to push for long-term outcomes. Preliminary evidence suggests that firms with more substantial board ownership may achieve higher long-term returns on invested capital than their “zero ownership” counterparts. Private equity boards, where equity ownership is the norm, can offer valuable examples of how director alignment can support long-term decision-making and accountability.
Objectives:
- Assess how widespread board equity ownership practices are across global public markets
- Determine whether board equity ownership aligns directors’ interests with shareholders and improves long-term company performance (via associations between board equity ownership and long-term value creation [using 5-year ROIC as the primary performance metric])
- Understand under what conditions board share ownership is most effective and what barriers exist to increasing board ownership
- Provide practical recommendations for boards and investors on governance and incentive alignment