Boards play a critical role in steering companies toward long-term value creation – yet many independent directors have limited incentives 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 peers. Private equity boards, where equity ownership is the norm, can offer valuable examples of how director alignment can support accountability behind long-term decision-making.
Objectives:
- Assess the prevalence of board equity ownership across global public markets.
- Determine whether board equity ownership aligns directors’ interests with shareholders and improves long-term company performance via the associations between board equity ownership and long-term value creation (using 5-year TSR as the primary performance metric).
- Understand which conditions make board equity ownership most effective and what the barriers are to increasing the practice.