Let’s Talk Private Company Boards
Over the past few years corporate board service has garnered significant attention, particularly among Black executives. Whether we’re discussing the need for greater diversity in the boardroom, the state of board activism, heightened scrutiny in the face of Sarbanes-Oxley and Dodd-Frank regulations, the changing role of directors as a function of technological advances ((Artificial Intelligence (‘AI’), CyberSecurity, Cryptocurrency, etc.), increased focus on ESG, the growing number of ELC members joining corporate boards, or simply how to land a board seat, it is certainly top of mind for just about every corporate executive, particularly those who have reached, or are approaching, the pinnacle of their career.
If you are among the many corporate executives seeking a board seat, whether it’s your first or an additional board, understanding the different types of boards (public, private and nonprofit) and the differences between them, is fundamental to developing an effective strategy for positioning yourself for board opportunities. To that end, including a private company board on your board service journey may be right for you at a given point in your career, based upon several factors as discussed below.
What is A Private Company?
A private company is a privately held company that does not issue stock for public purchase on the open market (i.e., on a stock exchange), but instead has its stock held internally by an established set of individuals or companies. Sometimes private companies are closely held; that is, shares in the company are held by only a few individuals, although this is not always the case.
Types of Private Companies
Private companies are generally either family owned, employee owned, or private-equity owned. And no matter the ownership type, while some private companies are small, they all come in different forms and sizes. For example:
- Cargill – Family owned – Annual Rev. $114 Billion
- Mars – Family owned – Annual Rev. $37 Billion
- Deloitte – Partner owned – Annual Rev. $47.6 Billion
- Petsmart – Private Equity owned – Annual Rev. $7 Billion
Accordingly, there really is no “one size fits all” for Private Companies. So, executives are wise to remain open to all types of private board opportunities and to assess each one on its own merits as each experience will be uniquely a function of the company, its stage, its structure, its size, its ownership; its board maturity, its exit strategy (for PE companies), and its type.
Differences Between Public Companies and Private Companies?
As you consider the board opportunities that are best for you, here are some of the key differences between private company boards and public company boards.
Private Company Board – No public shareholders; no activists; relatively small group of owners; the board is the supreme governing body (except with private equity where the private equity firm is the supreme body), family-owned company boards present unique challenges as founder issues may surface; fewer regulations; more flexibility; potentially less liability than public boards; recruitment is frequently done via relationships; securing a seat is not necessarily easier, just a different path to landing a seat; a director role is often more operational in nature; much more hands on; potential issues include managing liquidity, growth, strategy, risk, and human capital management; relationship driven; mainly advising the CEO for smaller companies; greater day-to-day demand on time.
Public Company Boards – U.S. Securities and Exchange Commission (SEC) regulations apply (registration; reporting; disclosure); greater potential liability; shareholders are supreme governing body; many owners and investors; recruitment is frequently done via large search firms; the role is predominantly one of oversight and is relationship driven; need to manage activist threats; greater scrutiny (impact on other aspects of your life); more strategic; more complex.
Positioning Yourself for Private Company Board Service:
- Get on the PE firms’ radars (Apollo, Goldman; Carlyle Group; KKR; Vista Capital etc.)
- Know your personal value proposition and make sure it’s something that matters to boards: (AI; ESG; Cyber: Activism; CEO Succession; Crisis Management; Digital Transformation; Organizational Design; Customer Insights; Social Communication; Future of Work; M&A; Integration; Hyper Growth; Vertical experience; Finance; P&L; Tech).
- Raise your visibility/profile. Publish articles; speak on topics of interest; make sure the right people know you want to serve on a board.
- Nurture, then leverage, relationships (with current board members who may be rolling off; CEOs; general counsels; Nominating and Governance Committee chairs).
Learn more during the upcoming CBI Webinar Series: Conversations From The Boardroom: Understanding the Landscape of Private Company Boards with Gena Ashe.