Boardroom imperative: Youthful impatience: the challenge for corporate boardrooms is not to find younger directors, per se, but directors who are highly motivated to challenge conventional wisdom and practice.

• Author: Giuriceo, Kenneth
• Position: BOARD AGE AND TENURE

PRIVATE EQUITY, done correctly, involves the investment of new capital and new ideas. There is a tendency among many corporations to be grateful for the former and resist the latter.

We have a deal-screening rule at Clayton, Dubilier & Rice: We won't invest in a company unless we believe it can be improved by fresh ideas and the operational insights of our partners. This requires that the company's leadership be open to working not only with our financial capital but with our firm's human capital day in and day out. We also contribute perspective at the board level where members of the team are always active participants.

Although we, like many in private equity, are relatively young to have served on major corporate boards, we hope that our most noticeable differentiator is not youth, but youthful impatience. We want to be known for instigating constructive change. The challenge for corporate boardrooms is not to find younger directors, per se, but directors who are highly motivated to challenge conventional wisdom and practice. If one were to grossly generalize that older people tend to cling doggedly to comfortable strategies, while younger people tend to challenge hidebound group thinking, then we can confirm that all CD&R-appointed board members strive to be audaciously youthful.

Transformative impact

There are several powerful reasons why directors from private equity sponsors, often in their 30s or 40s (as we are), can have a positively transformative impact on the company:

Alignment--Private equity-appointed board members typically have substantial personal wealth at stake in the company, and they also are very aware that they are acting as stewards for their own investors. These board members are therefore themselves major shareholders, neutralizing the agency risk that too often plagues public company boardrooms.

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Insight--Private equity directors often have spent years specializing in the relevant industry, and their experience observing trends across companies in the same space can be brought to bear in a very valuable way in the boardroom. Private equity sponsors also usually perform intense due diligence prior to investing, so their appointed directors always arrive to the first meeting with actionable intelligence. The candid, informal and continual dialogue between the private equity firm and its portfolio company management means the directors benefit from granular, real-time performance data.

Time Horizon--As shareholders, private equity board members are motivated primarily by the prospect of long-term capital gains...