On 4 December 2020, FCLTGlobal led a CEO Roundtable bringing together leaders in private equity, institutional investing, advisory services and the public markets, with the aim of identifying practical, achievable goals to improve diversity and inclusion in private equity-backed companies’ boards of directors.

Recent research, including The Long-term Habits of a Highly Effective Corporate Board (2019), shows that diversity at the board level adds meaningful long-term value for companies and their stakeholders. Evidence on the increased effectiveness of diverse boards recently led Nasdaq to announce a proposed rule requiring listed companies have one woman and one other diverse board member – or explain why they weren’t complying. This proposed rule follows Goldman Sachs’ decision to underwrite only initial public offerings in the U.S. and Europe of private companies that have at least one diverse board member – which will increase to two in 2021.

While most attention has focused on public companies, the influence of private capital has grown substantially – private equity-controlled companies now outnumber public companies in the U.S. Yet much less is known about governance and board composition of private equity-backed companies; the limited data available suggests that private equity-backed portfolio company boards are significantly less diverse than those of public companies.

This session consisted of several breakout group discussions focused on key drivers of change, including sourcing and fostering talent, investors’ impact and influence, taking action within private equity firms, and insights from the public markets.


Christopher Ailman
Afsaneh Beschloss
Founder & CEO, RockCreek
Alan Bowser
Co-Head, Americas, Bridgewater Associates
Michael Carmen
Lead Private Equity Portfolio Manager, Wellington
Jim Coulter
Co-CEO & Founding Partner, TPG Global
Lars Dijkstra
CIO, Kempen
Henry Fernandez
Chairman & CEO, MSCI
Adena Friedman
President & CEO, Nasdaq
Jonathan Gray
President & COO, Blackstone
Jonathan Hausman
Head of Global Strategic Relationships, OTPP
Tom Joy
CIO, Church Commissioners
Kewsong Lee
CEO, The Carlyle Group
Martin Lipton
Senior Partner, Wachtell, Lipton, Rosen & Katz
Mark Machin
President & CEO, CPP Investments
Jose Minaya
CEO, Nuveen
Sabastian Niles
Partner, Wachtell, Lipton, Rosen & Katz
Robert Ohrenstein
Partner & Global Head of Private Equity, KPMG
Stephen Pagliuca
Co-Chairman, Bain Capital
Julian C. Salisbury
Global Head, Merchant Banking, Goldman Sachs
Dilhan Pillay Sandrasegara
CEO, Temasek
Rishab Sethi
Manager of External Investments, NZ Super Fund
Robert Smith
Founder, Chairman, & CEO, Vista Equity Partners
Mario Therrien
Head of Investment Funds and External Management, CDPQ
Theresa Whitmarsh
Executive Director, Washington State Investment Board
Eric Wilmes
Head of Private Equity, GIC
Mark Wiseman
Board Chair, Alberta Investment Management
Sarah Keohane Williamson

Sourcing and Fostering Talent

Executives agreed that improving diversity and inclusion requires an intentional, ongoing effort. “The tone has to come from the top,” said one CEO. “This has to be something that is pushed from the top down.”

Leaders have looked across their board recruitment processes for points of improvement and accountability. There is great depth and breadth of diverse talent, but mining it requires looking beyond traditional recruitment sources. Establishing relationships with talent networks, committing written diversity goals to board search criteria, and “asking other senior leaders for help in these pools,” can help companies reach beyond traditional recruitment.

Once talent has been identified, however, it is also important that companies look harder at how it is evaluated. “I think we are all doing a better job of making sure there is diversity in board candidate pools,” one executive remarked. But, they went on to note, it is also important to have diversity in recruiting panels, greater transparency in decision-making, and to evaluate outcomes, not intentions. The days of “the dog ate my homework” are over, remarked one leader.

Diversity in leadership roles within boards should also be a priority. One leader asked the group, “can we take it one step further? Who are the board chairs? You see even less diversity at that level. Boards should find pathways to develop their members into these positions.”

In order to make this concept more actionable, FCLTGlobal plans to develop a template that serves as a basis for sharing key aspects of diversity and inclusion on portfolio company boards, including composition, roles of various board directors, and measures of impact such as share of assets, revenues, or risk-taking.

Investor Influence

Public company shareholders provide input on corporate governance and board appointments through the proxy process. Institutional investors exercise this influence on private equity backed portfolio company boards through their choice of private equity investors and their interactions over time to support increased diversity. Investors increasingly recognize that diversity is important to achieving their own return goals, given growing data showing that diverse companies generate greater long-term value. As private equity companies work to diversify, investors can focus on the actions that are being taken to make improvements, raising these questions as part of their performance evaluations and in considering new mandates. “We’re trying to drive accountability and transparency,” said one investor. “It’s just a matter of time before diversity will be a requirement, not a nice-to-have,” said another. Institutional investors and private equity executives agreed that investors can influence change by cultivating partnerships over time.

Participants established that a conversation guide for private equity firms and investors detailing how to better collaborate and discuss milestones would be a valuable resource. FCLTGlobal will work to create such a guide, as we have done in areas such as risk and crisis management.

Actions for Private Equity Firms

Improvements in board diversity should be viewed as one element of an overall cultural and compositional shift in private equity businesses, said one leader. Those that have led in diversity and inclusion can play an important role in outlining best practices, as well as data collection, with respect to diversity and performance outcomes.

“Really this is about cultural change reinforced through a series of actions – in a sustained way – in order to make sure what is happening improves diversity and outcomes,” stated one executive. “Let’s then measure those outcomes. We start by measuring what it means when you have a diverse company. Does that company perform better? Are the earnings growing faster than in less diverse companies?”

Others expressed a need for transparency and engagement across the industry: “We need to be sharing best practices. We don’t communicate them. We know what we’re doing, but we don’t have a clue what others are doing.”

Another executive noted that in enhancing portfolio company board diversity, organizations “need to look in the mirror and then out the window.” Efforts at “conscious inclusion” at the board level should complement similar work at the management level of private equity firms and portfolio companies as well.

There was a clear demand for a playbook that would consolidate lessons learned across the group to share best practices. FCLTGlobal will interview many of the organizations involved and plans to develop such a playbook.

Lessons from the Public Markets

Public markets have seen a slow improvement in diversity, due in part to external mechanisms, such as legislation in Europe and at the state level in the U.S, as well as rules implemented by various market exchanges. In addition, public companies often want to reflect their employees and consumers. Proxy voting provides shareholders a direct means of feedback, and participants noted that proxy advisory organizations such as Institutional Shareholder Services and Glass Lewis are also important points of influence in public company behavior.

There was broad support for Nasdaq’s proposed diversity rule, and several participants noted that it will be influential in private equity given that a significant number of private equity-controlled companies eventually go public.

A number of private equity executives noted that Nasdaq’s new proposed diversity rule provides an important lever to promote diversity across their portfolio company boards and beyond their organizations. Endorsing similar principles for both portfolio company boards and for board-appointed advisors – who are both influential and often part of the network of potential board members – can be a clear “line in the sand” for the private market as well.

The key takeaway from this thread of the conversation is a recognition that the Nasdaq approach is a welcome and important step that can be extended both to private equity-backed portfolio company boards and to the teams advising them.

Thank you to the participants for joining us for this important discussion. Developing tools and resources to address the issues raised in these conversations will be crucial as we continue our mission to rewire global capital markets to support a long–term, sustainable economy. We welcome further suggestions and opportunities for collaboration. To learn more about the topics discussed here, view our library of resources at www.fcltglobal.org and follow us on social media @FCLTGlobal.

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